Partnerships
A Partnership is a business arrangement with two or more members who together share profits and losses. Partnerships are not taxed. Instead, taxes are taken out of the partner's share of profits.
A new business incurs losses initially, which can be offset working as a partnership. To deduct losses, you have to satisfy the passive activity loss (PAL) rules.
Advantages:
- Partners can bring in much-needed capital and expertise to the business.
- Partners file taxes as individuals and can deduct losses from their tax returns.
Disadvantages:
- Unlimited liability
- Lack of autonomy, joint decisions are required
