For example, business income is reported on the proprietor's personal tax return. One significant drawback is that a sole proprietor has personal responsibility for all business debts and court judgments. Each general partner has unlimited personal liability for partnership debts, can incur obligations on behalf of the partnership, and acts as an agent for the other partners and the partnership. The partners usually share equally in managing the business and dividing the profits, but they may set their own terms for these and other matters in a written partnership agreement. In a limited partnership, there are general partners and limited partners.
Limited partners are usually passive investors in the business.
They are not personally liable for partnership debts and the most they can lose is the amount invested in the partnership. In contrast with a corporation, a partnership dissolves and is liquidated upon the death or withdrawal of a partner unless the partnership agreement provides otherwise. For example, the agreement may allow a buyout of a deceased or withdrawn partner, election of a new partner, and continuation of the business. As a general rule, a limited partnership carries on unaffected by the loss of a limited partner. Corporation A corporation is an entity that is separate from its owners, with its own legal rights and responsibilities.