Partnership (redirected from Passive shareholder)

Partnership

Shared ownership among two or more individuals, some of whom may, but do not necessarily, have limited liability with respect to obligations of the group. See: General partnership, limited partnership, and master limited partnership.

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partnership

A business owned by two or more people who agree on the method of distribution of profits and/or losses and on the extent to which each will be liable for the debts of one another. A partnership permits pass through of income and losses directly to the owners. In this way, they are taxed at each partner's personal tax rate. Compare corporation, proprietorship. See also general partnership, limited partnership, silent partner.

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Partnership

A business structure in which two or more persons share in the ownership and profits and losses of the business. There are three main types of partnerships. In general partnerships, two or more partners, jointly and severally, share all profits and losses, management authority, and risk for the business. In a limited liability partnership, partners share profits and losses and divide management authority according to the company's specific structure. In case of liquidation, every partner is only liable for the amount he/she has invested in the company, much like a stockholder in a corporation. Limited partnerships have elements of both the previous structures, having both general partners and limited partners. General partners in a limited partnership must share a certain amount of profit and financial liability with limited partners according to an arrangement between them. In this situation, general partners have all management authority and unlimited liability, while a limited partner is only liable for his/her investment.

In most jurisdictions, partnerships are preferable to corporations because partnerships' profits are not taxed prior to distribution to the partners. In other words, there is no equivalent to a corporate tax on partnerships. On the other hand, partners have more legal and financial liability in case of liquidation than would shareholders and most management in a corporation.

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Partnership

A form of business in which two or more persons join their money and skills in conducting the business. Partnerships must file a return but are not subject to tax. Each partner reports his or her share of the partnership's income, gains, losses, deductions, and credit on his or her individual return.