A partnership is an "association of two or more persons to carry on as co-owners of a business for profit." Uniform Partnership Act § 202. These co-owners can operate the business by themselves, or hire employees and/or independent contractors to carry out tasks for them. As a practical matter, a partnership is usually created by the partners entering into a formal partnership agreement, which sets down ground rules for what capital contributions are required from the partners, how the business will be managed, and how profits and losses will be allocated, among other things.

In determining whether you want to operate as a partnership, you may want to consider the following factors:

  • Liability: Each partner in a partnership is personally liable for all the debts and obligations of the business, including liability for your own unlawful acts and those of your fellow partners and employees. For instance, if your partner writes a defamatory article or posts copyright infringing material on your jointly-run website or blog, then you can be held personally liable, and the winning plaintiff can can collect the judgment out of your personal assets, like your bank account or house. The same goes for a defamatory article or infringing post published by an employee of the partnership in the scope of the employment relationship.

  • Formation and Dissolution: A partnership is relatively easy and cheap to form. Please see the Forming a Partnership section for details on the required/advisable steps. You and your partners should draft and execute a partnership agreement. Drafting one that is highly customized to your business may involve some complexity. It will be up to you and your partners whether the assistance of a lawyer is required. Unlike a corporation, a partnership does not have a perpetual existence. Dissolution is provided for in the partnership agreement or happens with the death, retirement, withdrawal, expulsion, incapacity, or bankruptcy of a partner.

  • Management Structure: As a general matter, a partnership allows for an informal, de-centralized management style, with partners exerting direct control over the day-to-day affairs of the business. Partners are free to customize the management structure in the partnership agreement.

  • Operation: A partnership is relatively easy and cheap to operate. Partners do not have to observe the extra "formalities" of a corporation and there are generally fewer record-keeping and reporting requirements than for corporations or LLCs. Partnerships must still meet those tax and other regulatory obligations imposed on all small businesses. For more on the tax obligations of small businesses, see the Tax Obligations of Small Businesses section and the IRS's informational guide, Publication 583 (1/2007), Starting a Business and Keeping Records.

  • Ownership of Assets/Distribution of Profits: Partners generally do not own the assets of the business personally -- depending on state law, either the partnership itself owns all business assets or the partners are co-owners of partnership property. In either case, a partner that withdraws from the business is entitled to a share of profits and partnership assets after liabilities are taken into account, and the same is true for all partners upon termination of the partnership. Unless the partnership agreement provides otherwise, profits and losses are split up among the partners on an equal, per-capita basis. For example, if there are four partners, the profits and losses will be split up one-quarter to each partner, absent an agreement specifying some other distribution.

    • Among the most important assets of any business that operates a website or blog are its articles, posts, videos, and other content. For details on who owns what from a copyright perspective, see the Copyright Ownership of Articles and Posts section.

  • Tax Treatment: A partnership itself does not pay income tax. The profits or losses of the business "pass through" to the partners, and they pay income tax on their proportional share of the income at their individual rates. In this way, the partnership as an entity is generally not subject to the "double taxation" associated with corporations. Subject to limitations, partners may be able to deduct certain partnership losses against personal income from other sources, like a salary from a "day job," interest on savings, dividends from other investments, and gains from the sale of non-business property. If a partner files jointly with a spouse, these business losses may also offset the spouse's income.

    • Although the partnership itself pays no income tax, it must file an information return, Form 1065, annually with the IRS and provide the partners with a copy of their K-1. This return shows the partnership's income, deductions, and other required information, and must include the names and addresses of each partner and each partner's distributive share of taxable income. Relatively sophisticated accounting is required to accurately complete this form, and this could bump up operating costs for your business. For more information on the tax obligations of partnerships, see the IRS's page, Tax Information for Partnerships (includes links to forms and other resources).

If you are carrying on your online activities with a group of other journalists or bloggers (e.g., a co-blogging relationship) without a formal partnership agreement, it is still possible that a court could deem your group an informal legal or tax partnership, bringing with it potential personal liability for the actions of your co-publishers. This risk is greatly reduced, however, if your group does not intend to make a profit, or if your revenues are all scrupulously re-invested in the enterprise without distribution to group participants. For details, please see the Informal Group section of this Guide. Eric Goldman's article, Co-Blogging Law, gives the definitive treatment of liability pitfalls for co-bloggers operating informally.


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