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A legally binding partnership, however, requires that each partner is assigned specific roles and responsibilities, financial expectations, and future planning expectations for the business. The partnership should also have an agreement as to handling the exit of one of the business partners.

Although partnerships are legally recognized, partnership firms are not legal persons, unlike corporations. Therefore, while a partnership firm may be sued in its own name, the firm's partners are liable for the debts and obligations of the partnership firm.

Each partner reports their share of the partnership's income or loss on their personal tax return. Partners are not employees and shouldn't be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partner. For deadlines, see About Form 1065, U.S. Return of Partnership Income.

Take the partnership agreement and the partnership form to your secretary of state's office. You can usually submit the form in person or via mail or fax, but be sure to confirm delivery.

The five major forms of business in the United States are sole proprietorships, partnerships, LLCs, and C and S corporations. Each form has implications for how individuals are taxed, the personal liability of the owners, and how resources are managed and deployed in the set up and operations.

The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.