Partnership
What is a partnership?
A partnership is a business owned by two or more people who share in its profits and losses. Its terms are usually set out in a partnership agreement, and the business income is reported to its partners.
Numetix is the expert-led, AI-powered, human-in-the-loop bookkeeping layer that keeps each partner's capital, draws, and profit share recorded separately, so the partnership's books match its agreement.
What to keep in the books
- A capital account for each partner
- Records of draws, guaranteed payments, and profit allocations, see partner compensation
- A current partnership agreement that matches how the books are kept
Why it matters for service firms
Partnerships depend on clear agreements and clean records. Disputes often start when the books do not reflect what partners believed was agreed.
Frequently asked questions
What should a partnership agreement cover?
Typically ownership shares, capital contributions, how profits and losses are shared, decision-making, and what happens when a partner leaves. An attorney can draft an agreement that fits your firm.
How is a partnership different from an LLC?
A partnership is defined by its owners agreeing to share a business. An LLC is a state-law structure. Liability and tax treatment differ, so review options with an attorney and tax professional.
Official source: IRS: Partnerships.
This page is for informational purposes only and does not constitute formal legal or tax advice. Always consult a qualified tax professional about your specific situation.
This page is for informational purposes only and does not constitute legal advice. Always consult a qualified attorney about your specific situation.
Related terms and guides: partner compensation, pass-through entity, equity distribution, and profit per partner.