Unlike other kinds of business entities, the law does not require that the partners have anything in writing. However, it is strongly advisable for the partners to have a written partnership agreement. This helps to ensure that there is no disagreement about the important terms of their arrangement, about the obligation of the partners to contribute capital, and about the sharing of the profits and losses of the partnership. Those portions of a Partnership agreement that are not governed by the UPA are, of course, subject to the standard contract law concepts and rules. Each partner is personally liable for the obligations of the partnership and the acts of his or her co-partners while conducting partnership business.
Partnerships are also subject to unique rules in the Internal Revenue Code.
Each partnership must file a tax return, but it does not pay any tax on its income. Instead, the tax code treats partnership income as if it was distributed to the partners, and the partners themselves must pay tax on the income, even though no cash may have been paid out. Consequently, partnerships with taxable income must take into account the needs of the individual partners to pay taxes on partnership's income. It is not unusual for partners to begin their business as a partnership, and later convert the business to a corporation.