What defines a partnership in accounting?

A partnership in accounting is defined as a business structure where two or more individuals share ownership and management responsibilities. This arrangement allows partners to combine their skills, resources, and capital to operate the business. Each partner typically contributes to the business financially and may also be involved in its day-to-day operations, sharing in profits and losses according to the terms laid out in a partnership agreement.

This structure is distinct from a sole proprietorship, where one individual owns and manages the business independently. Partnerships can also vary in terms of the level of liability that partners may have, but the fundamental characteristic remains the joint ownership and management.

In contrast to the options detailing non-profit organizations or corporations, a partnership does not imply limited liability in the same manner as a corporation. In most partnerships, partners are personally liable for debts and obligations of the business, a key point that differentiates them from corporate structures.