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Accounting: Business Partnership & Consequences

1) Describe this Basic Type of Business Formation: Partnership

2) Explain the Following Consequences of the type of Business Organization:

- Tax Implications

- Legal Implications

- Accounting Implications, such as: SOX and FASB.

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1) A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

(However, in a limited partnership a partner in a partnership has liability which is limited to the extent of the partner's share of ownership. Limited partners generally do not have any kind of management responsibility in the partnership in which they invest and are not responsible for its debt obligations. For this reason, limited partners are not considered to be material participants.)

2) Tax Implications:

The partnership itself does not pay income taxes. However, each partner has to report their share of business profits or losses on their individual tax return. Estimated tax payments are also necessary for each of the partners for the year in progress. Partnerships must file a return on Form 1065 showing income and deductions. Estimated tax payments are also required if they expect their income to be greater than $1,000.

Legal Implications:

First of all, the formation of a partnership ...

Solution Summary

Business partnership and consequences are examined for accounting. Tax, legal and accounting implications are examined.