Tax Law Services, Inc.

Business and Corporate Laws

A sole proprietorship is a person engaged in business for himself or herself. The sole proprietor can engage employees to carry out the business but retains personally the profits and assumes the losses of the business.

A general partnership is an association of two or more persons who carry on as co-owners a business for profit. Partners in a general partnership are liable for partnership obligations to the full extent of their personal as well as business assets. Partners must be persons with the legal capacity to act as partners. It is important to understand that a general partnership can be formed orally by agreement of the parties or by a course of conduct, and that a formal, written partnership agreement is not required. For tax purposes, a partnership is not taxed as a separate entity but passes through tax items to its partners.

The partners of a registered limited liability partnership are not personally liable--by way of indemnification, contribution, assessment or otherwise--for the debts, obligations and liabilities of the partnership, although the partners remain liable for their own negligence, wrongful acts, errors or omissions. Partners of a registered limited liability partnership engaged in the practice of a profession are liable to the same extent shareholders in a professional corporation are liable for their professional activities.

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