Definition: A type of business entity that is run by two or more people under a joint name.
In business law, a partnership is when two or more people are in business together with a view to generating profits. The partners provide the capital on their own terms and therefore share the responsibility of running the business on agreement between its partners.
Partnerships are common in the same type of businesses as sole proprietors, but a partnership maintains an advantage of being able to raise capital since each partner can make a financial contribution. The partners are responsible for any liabilities of the business.
Partnerships are usually favored over corporations for taxations purposes. The partnership structure does not allow for a tax on the profits of the business on account of the fact that it is distributed to the partners. However, this depends on the structure of the partnership and the laws under which it operates.
Generally, owners of a partnership are exposed to a greater extent of personal liability than shareholders of a corporation would be.