Partnership

A partnership is an arrangement where two or more entities — individuals, companies, or trusts — carry on a business together with a view to profit. It is not a separate legal entity for most purposes, but it has its own ABN, TFN, and BAS registration.

Tax treatment

The partnership lodges a partnership tax return reporting net income or loss, but the partnership itself does not pay income tax. Net income (or the deductible share of a loss) flows through to each partner's own tax return, where they pay tax at their individual or company rate. Partners are taxed on their share as it is distributed or as it is allocated under the partnership agreement — not on withdrawals.

Partnership agreement

Partnerships should have a written partnership agreement covering profit and loss shares, capital contributions, decision-making authority, admission and exit of partners, and dispute resolution. Without a formal agreement, the relevant state Partnership Act applies default rules — which may not reflect the partners' intentions.

Liability

General partnerships carry unlimited joint and several liability — each partner is personally liable for the debts of the partnership, including debts incurred by other partners acting in the ordinary course of business. A limited partnership has at least one general partner with unlimited liability and one or more limited partners whose liability is capped at their investment.