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We use newly-constructed individual-level data on partnership contracts in late nineteenth century Rio de Janeiro to examine differences between limited and unlimited liability firms and partners, and to assess the impact of a major institutional reform that facilitated the formation of joint stock companies on the terms of partnership contracts. Contrary to expectation, we find that most unlimited partners contributed capital and received profit shares, and most non-managing limited partners received salaries. Limited partners contributed more capital and received lower salaries and profit shares than their unlimited partners; unlimited partners in limited firms received more favorable terms than those in unlimited firms. Finally, we find suggestive evidence that the reforms reduced the extent of income smoothing for the limited partner and increased the average quality of unlimited liability partners in limited liability firms. These findings highlight the role of incentives and the desire for income smoothing in shaping contract terms.