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Definition: A legal form of business with two or more people. There are two types of partnerships: general and limited.

A general partnership consists of two or more individuals who jointly own the assets, liabilities, revenues and losses. Each partner enjoys the benefit of certain tax allowances and each has legal ownership of the assets of the business.

A limited partnership is one where there are one or more general partners and one or more limited partners. Limited partners responsibilities are spelled out in the partnership agreement. Limitations can be placed on who makes decisions, how profits and expenses are allocated, how long the agreement is valid and what happens when the business is sold.

A silent partner is one who provides financial support but does not participate in the decisions of operating the business.

Because of the importance of the agreement, all partners should have their interests protected by a competent attorney. Any unpaid debts can be claimed against the entire partnership by forcing a sale of the business' assets. Any or all of the partners can be forced into bankruptcy, in order to force the sale of their personal property. Business income is taxed according to the proporation of ownership interest held by each partner. A silent partner may invest in a business and share in its profits and losses but does not have any say in how the business is operated. The identity of silent partners is generally kept secret from the public.

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I set up my home business as a partnership, because my mother helped finance my operations and she wanted to act as a silent partner.

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