Taxes - The owner must pay income taxes at normal individual rates on the full earnings of the business whether or not the profits are withdrawn. Two or more persons as co-owners organized to make a profit The general partnership is recognized as a separate legal entity for purposes such as owning property, having employees, and suing or being sued. Pooling of capital can increase bonding capacity. Unless otherwise agreed to in a partnership agreement, the partnership income is distributed equally to the partners, even if the original capital contributions were unequal. Partnership income is not taxed to the partnership.
All income is funneled to the partners who pay taxes as individuals.
Suppose a partnership pays each partner a salary and that the company profits are reinvested in the firm to permit greater growth. Each partner will pay income tax on the salary plus a prorated share of the profits that were left in the company. Each partner has equal management rights. Majority rules for decisions. Some decisions may require the consent of all partners such as any modification in the partnership agreement.