About Business Partnership Income Tax Benefits

What are the advantages of knowing about Business Partnership? To begin with, what are the advantages of Business Partnership? In a nutshell, a partnership is a legal agreement where two parties, called as business partners, enter into a partnership to further their mutual financial interests. The partners in such a partnership can be different individuals, firms, corporations, groups, interest-based enterprises or combinations. However, the primary advantage of a Business Partnership is that it helps the merging of finances, resources and ownership of assets easier for all parties involved.

There are many types of partnerships – general partnerships, limited partnership, joint venture, limited liability partnership and franchise. The type of partnership entered into depends upon the nature and needs of the business concerned. Some of the most popular types of Business Partnerships are discussed below:

A general partnership agreement may form a strategic alliance between two or more companies. Under this agreement, the company with which the other company is associated with supplies the goods or services to the partner. However, in some cases, the partnership agreement also covers the company which supplies the partner with the goods or services. This enables the companies to work together, while benefiting from lower operating costs and other advantages. The cost of the goods or services offered by the partner companies remain the same throughout the entire term under the agreement. These auctions, via sites such as Boat Parts are also available online.

In limited liability partnerships, the income or profits of the partnership are taxed only once. The income of the partners is not reduced in any way, irrespective of the profits made by one partner. Neither does the partner have to pay the income taxes on behalf of the partnership. The partners together then decide on the amount of annual income to be taxed. The annual income taxed is generally less than that of the individual companies’ profits. So, in simple terms, the income of the limited partnership will be taxed at a higher rate than the personal income of each partner.

The main advantage of such partnerships is that it allows limited partnerships to become members of trade associations. This ensures that the interests of all the partners are represented and that their respective rights are protected. All the businesses owned by the partnership can be readily accessed by franchisees. The franchisees can access the quality equipments manufactured by the partner companies. Moreover, the companies do not have to invest in buying premises and land for establishing their businesses.

Franchise systems involve relatively low returns but a long term position in the market. Hence, even if the partners fail to make good profits in the first year of the system, they can easily overcome this by investing in better equipment and increasing their sales. However, it is necessary to check the eligibility conditions and norms of the state before becoming a member of a franchise system.