 In this discussion, we will discuss the discussion question of what are the key characteristics of a partnership, contrast them with other types of entities. So to do this first, we may want to just look at a partnership and define what the partnership is going to be. And a partnership is going to consist of two or more individuals who have come together and have agreed upon, possibly with a partnership agreement, but if there is none, we would say that just the act of acting in a way to generate profit would be a partnership. So any two or more individuals that basically start doing business that are trying to generate revenue will in essence be a partnership. Now there are some other key characteristics of partnerships and we can start to look at them and compare and contrast them to other types of entities to see what those characteristics are and what the differences are. Some things are going to be the same between partnerships and other types of businesses. Of course, we're talking about business type of entity, the main objective being revenue generation. With a partnership, we've got something called mutual agency, which may not be there in all other types of entities. For example, a sole proprietor doesn't have the same kind of issues of mutual agency and that just means that each partner act as an agent of the partnership. That's important, really important to know because we need to be able to realize that when we go into a partnership that either partner can make contracts of the partnership which binds the entire partnership and thereby binds the other partner within the realm of that partnership agreement. So it's important to keep that in mind. There's also, for a general partnership, a limited liability or there's unlimited liability, meaning there's no corporate shield really between the partners in the business and the personal assets. So if someone was to sue the partnership, they could possibly go after the personal assets as well. And again, that combined with the mutual agency type of situation is something to keep in mind when considering partnership type of organization. Want to note that there's mutual agency, the other partners can make decisions and make the partners liable in certain contracts and they also have more exposure in terms of their personal assets in terms of the liabilities for them. The partnership is also typically a limited life type of business, meaning that it's only there as long as the people are there. And so if a partner leaves or a partner perishes, a partner dies, then of course the partnership will terminate, whereas some other types of business entities, not sole proprietors in the same way, but a corporation is going to be a type of entity that has a life that continues on past possibly or has the ability to do so given the fact that the corporation is its own separate legal entity. So that's going to be some differences. So it's also noting that the partnership is a pass-through entity for tax purposes. So that means that the partnership entity is not going to be taxed on the net income of the partnership, but that net income, taxable income flows through to the individual partners and then will be taxed on their individual 1040 returns. Some other types of entities that are similar and different that the most common is a sole proprietor, which has many of the same characteristics of a partnership, including unlimited liability of the partnership and pretty easy to format. But it only has one individual, of course, and there could be differences in certain like when someone decides, should I be a sole proprietor or should I get partners? Meaning, for example, we might have a situation where we could say, I could be a sole proprietor and hire contractors or I can be a sole proprietor and take on a partner in the business. And the pros and cons of that is, of course, if you take on a partner, it's often easier to get capital investment from that partner to contribute to the business. However, you also have that mutual agency issue where either partner is going to be able to have agency over partnership and make binding decisions. And of course, the decision-making is now split between the partner. So that's a critical difference between a partnership and a sole proprietor. And there is often a decision-making process for an individual that has a business and wants to, you know, possibly take on some other tasks needed in the business, how to do so. Should we get an employee? Should we get a contractor? Should we get a partner? Then we have the other typical, most common type or most known type of organization, which is a normal C corporation, just a normal corporation. And the major difference between the corporation and the partnership is that it's a separate legal entity. And the major reason why you want to be a corporation is that it has that limited liability, meaning it has more protection against personal assets from the business for any kind of problems that happen within the corporation, meaning someone sued the corporation, for example. Theoretically, they can sue the assets and liabilities of the corporation, not necessarily going after a personal home or residence or something like that. So that's going to be one of the benefits of a corporation. It's typically more expensive, more complex to set up the corporation. So those are going to be the cons of the corporate entity. There's also double taxation with a corporate entity. So, you know, it gets taxed at the corporate level, and then it's going to be taxed at the individual level once the dividends are given to the individuals, whereas a partnership has that flow through and therefore only taxed at one time at the individual level. The corporation having these problems has led to some other types of entities, which are kind of hybrid type of entities really. And those are going to be things like an S corporation and an LLC type of corporation or an unlimited liability corporation. So those are going to be, you know, an S corporation is a corporation leaning towards a corporation being a separate legal entity. However, it's going to add a flow through characteristics so that it doesn't get taxed at the corporate level, but flows through like a partnership to the individuals and gets taxed from the individuals, thereby reducing or eliminating hopefully that double taxation problem. I say hopefully because it could, that's on the federal side, it could be resulting some taxes on the states depending on the state that they're in. But it should also keep that liability protection. That's going to be one of the main characteristics or benefits of this kind of hybrid. They're trying to get the best of both worlds. The LLC limited liability company is similar to a more closer to a partnership, but the same kind of hybrid. The idea is that we get some more liability protection and still keep that kind of flow through entity to remove the double taxation. And an LLC has a lot of flexibility with different type of profit sharing agreements, how we're going to share profit, whereas a S corporation or a corporation is a bit more stagnant, it's a bit more stringent. We have to have, we have to have all the same shares and you can have more shares or less shares, but there's not amount of flexibility you have with a partnership agreement where you can allocate the net income in basically any kind of way that you can come up with if you want to design it in the partnership agreement, which really helps when different partners are putting in different contributions to the partnership and you want to design a profit sharing plan that coincides with the contributions of the partners.