Business Partnership | Meaning and Definition

What is Business Partnership? 

A business partnership is a legal agreement between two or more people to operate a business together. Partners share in the profits and losses of the business, and each partner has an ownership interest in the company. 

Partnership agreements should spell out each partner’s role and responsibilities, how profits and losses will be shared, how decisions will be made, what happens if one partner leaves the company, and other important details. It’s important to have a written agreement in place to avoid misunderstandings about what partners are responsible for. 

Types of Business Partnerships

•   A Limited Partnership (LP) is a partnership where some partners have limited liability. This type of partnership is useful when you want to raise money from investors.
•   The General Partnership (GP) is the most common type of partnership. In a General Partnership, all partners have unlimited liability. This means that they are personally responsible for the debts and liabilities of the business. 
•   The Limited Liability Partnership (LLP) is a newer partnership that offers limited liability to all partners. This means that partners are not personally responsible for the debts and liabilities of the business. LLPs are popular because they offer more protection than a GP but less protection than a corporation. 

Business Partner vs. Shareholder

A shareholder is an owner of a company, while a partner is someone who has agreed to work with and help another business owner to share in the profits and losses of the company. 

Shareholders have a financial interest in the company, while partners do not necessarily have a financial interest. Partners may invest money in the company, but they may also contribute their time and skills without any financial investment.