A partnership consists of two or more individuals or entities who carry on a business in common with a view to a profit. A partnership does not have a separate legal identity.

Partners will generally be jointly liable for obligations that arise from the partnership. However it is possible to form a limited partnership (whether incorporated or unincorporated) in most jurisdictions.

Partnerships are governed by state and territory legislation, contract law and common law.

It is generally not necessary to have a written partnership agreement to constitute an ordinary partnership, (although it is highly advisable to have one).

Important considerations in commencing business under a partnership structure will be obtaining necessary registrations and ensuring an appropriate partnership agreement is drafted, but a lack of these things will not affect the existence or validity of the partnership itself.

Costs of establishment can be confined to business names and other registrations for which fees are charged and costs of obtaining professional advice.

See Commencing a business as a partnership.

A partnership will have ongoing compliance obligations with various regulatory requirements which will include taxation reporting and compliance, keeping business names and other registrations up-to-date. Partners should also have regard to their duties both to each other and to outsiders.

See Ongoing compliance requirements.

The advantages of a partnership structure include:

• ease of establishment;

• minimal reporting obligations and often fewer compliance burdens;

• relative privacy;

• taxation advantages including the ability to distribute losses and the application of certain capital gains tax concessions;

• responsibility and control is shared; and

• the availability of finance can be greater with multiple parties pooling their collective resources.

The disadvantages of a partnership structure include:

• with the exception of some professional partnerships, there is a limit of 20 partners;

• partners are jointly liable for debts and other contractual obligations and jointly and severally liable for wrongful acts;

• a partnership is not a distinct entity and so does not enjoy perpetual succession;

• the ability to transfer ownership of a partnership interest may be restricted and absent a partnership agreement which deals with continuity, the retirement and admission of new partners can cause practical difficulties; and

• inflexibility for estate planning, succession planning and asset protection; and

• partners are taxed on their share of profits at their marginal rate, which may not be tax effective in some instances.

See Advantages and disadvantages of a partnership structure.

Changing from a partnership structure to another form of business structure will ordinarily involve a winding up of the partnership and, after liabilities have been satisfied, a transfer of the assets and undertaking to the desired structure.

See Changing to another business structure.

In some states and territories legislation allows for the creation of limited partnerships. A limited partnership must consist of:

• at least one general partner, who has the same rights and liabilities of ordinary partners; and

• at least one limited partner, who contributes capital and shares in profits, but is not entitled to take part in management of the partnership, and is not liable beyond their capital contribution.

A body corporate may be a general partner or a limited partner.

See Limited liability partnerships.