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An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

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Business Partnership

What is a Business Partnership?

A business partnership is a legal agreement between two or more entities that determines shared ownership and operation of a business. A partnership may be between two people, two businesses, or shared among any number of people and organizations. For the definition of an HR business partner, click here: HR Business Partner

How Is a Business Partnership Established?

A business partnership usually begins with a verbal agreement between the business partners to form a new business or share an existing business, and that agreement is then confirmed by a written document outlining the type of partnership and details of the arrangement, signed by all parties.  

What Are the Types of Business Partnerships?

There are three main types of business partnerships:

  • General Partnership: All of the business partners are general partners, meaning they are involved with operating the business and share liability for the business.

  • Limited Partnership: One or more general partners operates and is liable for the business while other limited partner(s) may function as advisors or simply as silent investors and are not liable.

  • Limited Liability Partnership: All partners are shielded from the actions of the company or other partners, as in many medical clinics and law firms where the individual liability of the partners is seen as too great to be shared by all partners.

What Is the Difference Between a Business Partner and a Shareholder?

While both business partners and shareholders can claim some ownership of a business, a business partner’s ownership is based upon the agreement with other partners in the business and often involves some form of control over how the business operates. A shareholder is an investor who owns shares in a publicly traded business, and while that affords them some influence (like the right to vote on major company decisions), their participation is limited, and usually based on the number of shares they own. However, what a shareholder loses in terms of influence within the business is offset by the fact that shareholders are not liable for the actions of the business; they may lose or gain money as a result of the performance of the business, but they cannot be held accountable for any illegal activity on the part of the business or its partners.