On behalf of Kadish & Associates Law Group posted in Business Formation & Transactions on Thursday, February 20, 2020.
When two or more people go into business together, they might opt to form the company as a partnership. One of the options that falls under this category is the limited partnership (LP). In this arrangement, one or more of the partners is only liable for amounts that are up to their investment amount.
Each owner in a partnership must put in skills, labor, property or money for the business. At least one of the partners is responsible for making decisions for the company. The partners who have limited liability might not do anything with the day-to-day running of the business. Instead, they are more passive.
The general partners in this type of partnership are the ones who are liable for the company’s debts and any litigation it goes through. They are the ones who have a say in the managerial decisions.
If all of the partners have a limited liability, the company is established as a limited liability partnership (LLP). The difference between the LLP and the LP is that all the partners in the LLP can have a say in the daily decisions about the company. Typically, LLPs are professional businesses like accounting firms.
In an LLP, the partners aren’t held responsible for the actions of the others. This includes situations involving negligence or misconduct.
The business structure you choose for your company has a big impact on your personal liability and the tax obligations it will face. Be sure that you think carefully about these before you file the paperwork for the business. If you’re in a partnership, make sure that the terms of the agreement are clearly outlined in the contract.