Accounting for Partnerships Unit 6 Seminar
Forming a Partnership • A partnership is an association of two or more persons to carry on as co-owners of a business for profit. • Type of Business: - Small retail, service, or manufacturing companies - Accountants, lawyers, and doctors
Characteristics of Partnerships • Association of Individuals - Legal entity - Accounting entity - Net income not taxed as a separate entity • Mutual Agency - Act of any partner is binding on all other partners, so long as act appears to be appropriate for partnership • Limited Life - Dissolution occurs whenever a partner withdraws or a new partner is admitted - Dissolution does not mean business ends
Characteristics of Partnerships • Unlimited Liability - Each partner is personally and individually liable for all partnership liabilities • Co-Ownership of Property - Each partner has a claim on total assets - Claim does not attach to specific assets - All net income or net loss is shared equally by partners, unless otherwise stated in partnership agreement
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