Creating, Financing, and Marketing a Business
There are three types of partnerships - a general partnership, limited partnership, and limited liability partnership. General partnerships consist of two or more partners who are both responsible for the business. They share the assets and profits, as well as the liabilities and management responsibilities for running the business. A business owner may opt for either a limited partnership or a limited liability partnership. In a limited partnership, there are one or more general partners and one or more limited partners. The general partners participate in management and have 100 percent of the liability for partnership obligations. Limited partners cannot participate in the management and have no liability for partnership obligations beyond their capital contributions, protecting them against personal liability for the partnership's debts and other obligations. They do, however, receive a share of the profits for their involvement as limited partners. For the business owners who do not want to assume any liability whatsoever, there are limited liability partnerships (LLPs). An LLP allows limited liability for all of the partners. Like general and limited partnerships, LLPs pass the profits and losses through to the partners, and LLPs have the flexibility of choosing either a centralized management structure or a completely decentralized structure like a general partnership. Unlike a general partnership, partners in an LLP have limited liability and, unlike limited partners in a limited partnership, they do not lose their limited liability if they actively participate in management. Another advantage of general partnerships is the flexibility they offer. In partnership agreements, the partners are free to set their responsibilities and benefits as they see fit or as the needs of the business dictate. The structure of the organization and the distribution of profits and losses are much more flexible in a general...
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