Starting a Business - Partnership

Limited Partnership (LP)

2 types of partners: -general (active management) -limited (money only) Personal Liability: >only general partners are PERSONALLY liable -Must file a certificate of limited partnership to make clear who's responsible

Limited Liability Partnership (LLP)

Advantages: -Limited liability of partners -NOT taxable -Can choose duration *Very popular among professionals

Pros and Cons of Partnerships

Advantages: >don't pay taxes >easy to form >help with the work and financing. Disadvantages: >each partner is liable personally >partners liable for each other >funding may be difficult (can't sell shares) >management may be difficult >transferability is limited

General Partnership

An unincorporated association of two or more co-owners who carry on a business for profit Features: -each partner is a general partner -Share profits, losses and management equally -easy to form -can be held personally liable (for their partner's oopsies too) -owe fiduciary duties to each other -can't transfer interests, just the value -CAN'T SELL SHARES TO MAKE MONEY, must borrow NO WRITTEN AGREEMENT REQUIRED Just: - two or more people doing business together, - sharing management; - sharing profits and losses. WRITTEN AGREEMENTS ARE ADVISABLE. They can cover: - allocation of management duties; - division of profits and losses; - calls for capital; - admittance of new partners; - continuation after dissociation

Dissociation

When a partner quits the partnership >The partnership can either: - buy out the departing partner and continue - end business and end partnership Partners always have the power to leave a partnership but may not have the right.