Chapter 12

Partnership Contract

Agreement among partners that sets terms under which the affairs of the partners are conducted; articles of partnership.

Partnership

An unincorporated association of two or more people to pursue a business for profit as co-owners.

General Partner

Assumes management duties and unlimited liability for the debts of the partnership.

C Corporation

Corporation that does not elect or qualify to be treated as a partnership for income tax purposes.

Partnership Liquidation

Dissolution of partnership by 1) selling noncash assets and allocating any gain or loss according to the partners' income-and-loss ratio 2) paying liabilities 3) distributing any remaining cash according to partners' capital balances.

Unlimited Liability

Each partner can be called on to pay a partnerships' debt.

Mutual Agency

Each partner is a fully authorized agent of the partnership.

Statement of Partners' Equity

Financial statement that shows total capital balances at the beginning of the period, additional investment by partners, income or loss of the period, partners' withdrawal and the partners' ending capital balances.

S Corporation

Has 100 or less stock holders and can elect to be treated as a partnership for income tax purposes.

Limited Partnership LP

Has two classes of partners; limited partners and general partners.

Limited Partner

No personal liability beyond the amounts they invest in the partnership.

Limited Liability Company LLC

Organization form that combines select features of a corporation and a limited partnership; provides limited liability to members, is free of business tax, and allows members to actively participate in management.

Partner Return on Equity

Partner net income divided by average partner equity for the period.

Limited Liability Partnership LLP

Partnership in which a partner is not personally liable for malpractice or negligence unless that partner is responsible for providing service that resulted in the claim.

Partnership

Unincorporated association of two or more persons to pursue a business for profit as co-owners.