Two or more people can form a partnership to go into business. Partnerships are not very common. The primary reason for this is unlimited liability for partners. Not only is a partner liable for his/her actions, the partner is also liable for the actions of the other partner. There are other legal rules governing partnerships that make partnerships unattractive for businesses.
The advantage of a partnership is income taxes. Income or loss of a partnership can usually be reflected in partners’ individual income tax returns which is usually an advantage. Another advantage of a partnership is simplicity.
It is always a good idea for the terms of a partnership to be reflected in a written partnership agreement, which should be prepared by an attorney. A partnership agreement is not filed with the Secretary of State’s office. Another advantage of a partnership is that the terms of the partnership reflected in the partnership agreement are not generally made available to the public.