Essential accounting terms and definitions for topic around business partnerships.

Partnership – An association of two or more persons to carry on as co-owners of a business for profit.

Partnership agreement – A written contract expressing the voluntary agreement of two or more individuals in a partnership.

Limited partnership – A partnership in which one or more general partners have unlimited liability and one or more partners have limited liability for the obligations of the firm.

Limited liability company – A form of business organization, usually classified as a partnership for tax purposes and usually with limited life, in which partners, who are called members, have limited liability.

Limited liability partnership – A partnership of professionals in which partners are given limited liability and the public is protected from malpractice by insurance carried by the partnership.

Limited partner – Apartner whose liability for the debts of the firm is limited to that partner’s investment in the firm.

General partner – A partner who has unlimited liability for the debts of the firm.

Partners’ capital statement – The owners’ equity statement for a partnership which shows the changes in each partner’s capital account and in total partnership capital during the year.

Partnership dissolution – A change in partners due to withdrawal or admission, which does not necessarily terminate the business.

Partnership liquidation – An event that ends both the legal and economic life of a partnership.

Capital deficiency – A debit balance in a partner’s capital account after allocation of gain or loss.

Income ratio – The basis for dividing net income and net loss in a partnership.

No capital deficiency – All partners have credit balances after allocation of gain or loss.

Schedule of cash payments – A schedule showing the distribution of cash to the partners in a partnership liquidation.

Admission by investment – Admission of a partner by investing assets in the partnership, causing both partnership net assets and total capital to increase.

Admission by purchase of an interest – Admission of a partner in a personal transaction between one or more existing partners and the new partner; does not change total partnership assets or total capital.

Withdrawal by payment from partners’ personal assets – Withdrawal of a partner in a personal transaction between partners; does not change total partnership assets or total capital.

Withdrawal by payment from partnership assets – Withdrawal of a partner in a transaction involving the partnership, causing both partnership net assets and total capital to decrease.