Partnership (General and Limited)
These days, partnerships are much less common than they once were as business owners now seek the limited liability protection of corporations and LLCs. General partnerships were traditionally favored for their simplicity (they could be formed with a handshake), flexibility and easy administration. However, a general partnership does not provide limited liability protection to the partners. Instead, the partners are exposed to the liabilities and the risks of the business. Nevertheless, partnerships still prove to be advantageous in today’s business environment under the appropriate circumstances. There are special types of partnerships that combine the flexibility of the traditional partnership form with limited liability protection for the business owners, including:
- Limited partnerships (LP);
- Family limited partnerships (FLP);
- Limited Liability Partnerships (LLP).
Partnerships can also be a useful form of business entity for other business ventures, such as agreements between two corporations or LLCs or persons pursuing a joint venture.
Forming a partnership can be as simple as two people verbally agreeing to split the profits of a business activity. However, a written partnership agreement is recommended and should be drafted to ensure proper protection and to avoid future disputes. The partnership agreement will set forth the arrangement between the partners, whether they are individual or corporate partners, and, at a minimum, should specify:
- Partnership name;
- Identification of partners;
- Location of partnership;
- Division of profits and losses;
- Each partner’s percentage of ownership;
- Each partner’s initial capital contribution.
While the use of partnerships as a form of business entity has decreased significantly over the years as business owners turn to entities such as limited liability companies and corporations, they are still very beneficial. If you are thinking about forming a partnership, or you want to learn more about the respective benefits of a partnership, contact Tailored Legal today to schedule an initial consultation to you. During the consultation, an experienced business attorney can help you to decide whether the partnership form is right for your business.