Mutual Agency - Any partner can bind the other partners to a contract if he or she is acting within the general scope of the business. Limited Life - A partnership may be dissolved as the result of any change in the ownership. These include death, bankruptcy, incapacity, withdrawal of a partner, addition of a new partner, or expiration of the time specified in the partnership agreement. Unlimited Liability - Each partner is personally liable for all debts incurred by the partnership. Federal Income Taxes - Partnerships are not subject to federal income taxes.
Partnerships file federal income tax returns for informational purposes.
The initial investment of the partners may include cash, other assets, and liabilities. Debit cash and credit the partner's capital account Cash, other assets and liabilities - Debit cash, debit assets, credit liability and partner's capital account. If other assets are contributed to the partnership, the fair market value of the assets should be used. The ratio to be allocated to each partner should be in the Partnership Agreement. If no written agreement exists, profits and losses should be shared equally.