Are you looking to start up a business? As you can imagine, starting a business is often a complex legal matter, regardless of the type of business partnership you are attempting to pursue.
There are a variety of partnership types that many people like to pursue, and the reasons for these decisions depend on the benefits of the partnership. A business disputes attorney can help.
Generally, there are three main types of business partnerships, which include general partnership (GP), limited partnership (LP) and limited liability partnership (LLP).
These common partnerships each possess their own tax, liability, and business incentives that are ideal for specific business ventures. An attorney can go in to further detail, but here are the main types of business partnerships and more information about the benefits of each partnership:
General Partnership (GP)
A general partnership is the most basic partnership type that involves two or a variety of partners that operate a business venture. General partnerships are convenient to begin and are ideal for individuals that wish to partake in a long-term business venture.
General partnerships also have their own set of advantages, which include:
● It’s Easy to Create: General partnerships require no state filing. This partnership commences when all partners begin their business activities.
● Low Setup Cost: Since general partnerships are not required to engage in state filing, they are not obligated to pay a formation filing fee, or pay franchise or state fees. While the partnership is still required to obtain a business license and necessary permits, a general partnership is a cost-effective of starting a business.
● Few Ongoing Commitments: Forming a general partnership is a convenient method of business that doesn’t require the formation of annual meetings among owners, unlike corporations. Partnerships are also not required to address partnership interest and keep their personal assets separate from the assets of the business.
Limited Partnership (LP)
A limited partnership is a common partnership that consists of a general and limited partner. The general partner oversees the day-to-day operations of the business and receives unlimited liability in terms of the debts and assets of the business.
On the other hand, the limited partner possesses limited liability and cannot participate in the management of the business.
Limited partnerships have a variety of benefits that include:
● Unlimited Liability for General Partner: In this partnership, the general partnership has unlimited liability, which simply means that his/her assets cannot be used to satisfy any business debts.
● Limited Partnerships are Short-term: LPs are often the partnership of choice among many short-term businesses. Most firms are commonly labeled as limited partnerships, as well as family estates.
Limited Liability Partnership (LLP)
In a limited liability partnership, both partners are granted limited access to the daily operations of the business, whereas a limited partnership grants one partner unlimited liability. Limited liability partnerships are exclusive partnerships that possess a distinct array of incentives and benefits, such as:
● LLPs are Used by Professionals: Limited liability partnerships can only be used by specific business professionals such as attorneys, doctors, dentists, accountants, and other professions that are labeled as professionals under Idaho state law.
● Personal Asset Security: In this partnership, both parties’ personal assets are protected from being used to satisfy any business debts.