Guaranteed Payments To Partners

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DEFINITION of 'Guaranteed Payments To Partners'

Payments that are guaranteed to be made to a partner irrespective of whether the partnership makes a profit or not. Guaranteed payments to partners are made to ensure that partners are compensated for specific contributions they make to a partnership, whether in the form of goods or services. This eliminates the risk of their making personal contributions of time or property for which they are never paid if the partnership is not successful.

BREAKING DOWN 'Guaranteed Payments To Partners'

Guaranteed payments essentially function as a form of salary for partners. This income may be subject to self-employment tax, depending on the terms of payment. Guaranteed payments are considered first-priority distributions and will be paid out even if the partnership is losing money.

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RELATED FAQS
  1. Is it possible to fund limited partnership interests with SEP contributions?

    Yes. The same rules that apply to investing Traditional and Roth IRA assets applies to SEP IRA assets. Therefore, providing ... Read Full Answer >>
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    Joint ventures are a very specific type of business arrangement. They can be organized in several different legal structures, ... Read Full Answer >>
  3. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
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    Advantages of greenfield investments include increased control, the ability to form marketing partnerships and the avoidance ... Read Full Answer >>
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    A family limited liability company (LLC) is formed by family members to conduct business in a state that permits such form ... Read Full Answer >>
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    Business structures provide benefits to business owners and entrepreneurs. In the small business arena, the most common business ... Read Full Answer >>

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