Starting a new business with partners that you trust and work well with is an exciting venture. When planning for your partnership’s future success, you will first want to consider what type of partnership is right for you. The following are four types of partnerships you may want to learn more about.
A general partnership is the type of partnership many people are already familiar with. In a general partnership, the partners to the business will execute a partnership agreement. They equally split ownership and profits of the business. Each party has the right to enter business contracts and take out loans in the name of the business. Finally, all partners in a general partnership are personally liable for all the debts and obligations of the business.
A limited partnership (LP) is more formal than a general partnership. One or more general partners will be entirely responsible for the running of the business, while the other limited partners generally will fund the business but do not take an active role in it. For this reason, limited partners, unlike general partners, are not personally responsible for the debts and obligations of the business.
Limited liability partnerships
A limited liability partnership (LLP) shares some similarities to general partnerships. In an LLP, all partners play an active role in the business. However, while the partners are personally liable for the debts and obligations of the business, they are not personally liable for the mistakes of their co-partners. Not all states allow LLPs, and some limit them to certain professions.
Limited liability limited partnerships
Some states allow for limited liability limited partnerships (LLLPs). LLLPs are similar to LPs in that there is one or more general partners who operate the business. Unlike LPs, however, general partners along with all other partners in the LLLP are not personally liable for the debts and obligations of the business.
Get your partnership started on the right foot
Partnerships, like any other business, should not be jumped into blindly. As excited as you and your partners may be to get your business going, you will first want to make sure you have selected the type of partnership that is right for you so you can move forward with the business formation process on the right foot.