Which term describes the legal relationship of two or more individuals co-owning a business for profit?

• A. Partnership
• B. Sole Proprietor
• C. Corporation
• D. Franchise

Answer: (A)

Two or more people who share ownership and operate a business for profit are described by the term partnership. A partnership creates a legal relationship where the owners (partners) share control, profits, and losses according to an agreement. In a general partnership, each partner usually participates in management and has personal liability for the business debts, with profits flowing to the partners’ personal tax returns. This differs from a sole proprietorship, where one person owns and runs the business; a corporation, which is a separate legal entity owned by shareholders; and a franchise, which is about operating a business under someone else’s brand and system rather than co-owning the business with others.