The income or loss of a sole proprietorship is combined with the other earnings of an individual for income tax purposes. Partnerships A partnership is a relationship between persons carrying on a profit-motivated business in common. That is, a defining characteristic of a partnership is that there must be more than one person involved in the business. Any number of individuals operating a business in common can establish a general partnership without any government approval. A general partnership is created by the partners and is routinely registered with the government within 60 days of creation.
Registration is relatively easy and primarily involves paying a fee to the government.
Determining and documenting the rights and obligations of the partners is much more involved. These rights, responsibilities and obligations are typically detailed in a partnership agreement. It is a good idea to have such an agreement for any partnership. A partnership is a legal entity recognized under the law and as such it has rights and responsibilities in and of itself. A partnership can sign contracts, obtain trade credit and borrow money.