Partnerships
A
Partnership is a type of business entity
in which partners (owners) share with each other the
profits or losses of the business undertaking in which
all have invested. Partnerships are often favored over
corporations for taxation purposes, as the partnership
structure does not generally incur a tax on profits
before it is distributed to the partners (i.e. there
is no dividend tax levied). However, depending on the
partnership structure and the jurisdiction in which
it operates, owners of a partnership may be exposed
to greater personal liability than they would as shareholders
of a corporation.
The federal government of the United States does not
have specific statutory law governing the establishment
of partnerships. Instead, the several composite states
of the country each contain their own statutory and
common law governance of partnerships. These states
largely follow general common law principles of partnerships
whether a general partnership, a limited partnership
or a limited liability partnership. In the absence of
applicable federal law, the National Conference of Commissioners
on Uniform State Laws has issued non-binding models
laws (called uniform act) in which to encourage the
adoption of uniformity of partnership law into the states
by their respective legislatures. This includes the
Uniform Partnership Act and the Uniform Limited Partnership
Act. Although the federal government does not have specific
statutory law for establishing partnerships, it has
an extensive and hyperdetailed statutory scheme for
the taxation of partnerships in the Internal Revenue
Code. The IRC is Title 26 of the United States Code
wherein Subchapter K of Chapter 1 creates tax consequences
of such great scale and scope that it effectively serves
as a federal statutory scheme for governing partnerships.
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