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| A general partnership is comprised of a group of two or more individuals who enter into an agreement to start a business. The partners and the business are legally the same. The partners enter into an agreement called the articles of partnership and are typically equally active in the business and the business’s management, unless otherwise stated in the partnership agreement. All profits and losses are shared by the partners in a joint business venture.

Some of the benefits of a Limited Liability Company are that as a Limited Liability Company it limits the owner of personal liability for business actions. The members are liable, but normally just to the amount of their share in the business. Their individual assets are not considered for resolving business debts. The fact that your personal assets are protected is a great benefit. Whereas, operating under a partnership all members are individually accountable for the company’s debt. In comparing the differences between a

The formation of a partnership is far easier and much less complicated procedure when compared to a corporation. A partnership is formed either through an express agreement, which is an oral or written agreement, or an implied agreement, which is usually decided by examining the ongoing conduct of the individuals involved. There are no firm or exact legal documents required for written or oral agreements. An implied partnership is formed through conduct; this means that a partnership decidedly existed regardless of there being any written or oral agreement. If the partnership wishes to have a separate

Is a limited partnership treated as a separate entity for all purposes? If not, give an example of an instance in which a limited partnership is treated as an aggregate of its partners.

Liability All liabilities are the responsibility of each partner. In the event of litigation, any creditors can go after the personal assets of each partner to recover any debt owed. But since liability is spread out between the owners, one may feel less risk is being taken. 2. Income Taxes General partnership may also benefit from pass-through taxation, meaning the partners are taxed like sole proprietors. Business income is reported on the personal tax filing while business losses can be deducted to reduce personal tax liability. The partnership itself is not subject to federal income tax. However the partnership needs to file an information return utilizing the IRS Form 1065. 3. Longevity or continuity of the organization Once the partnership agreement is fulfilled, the general partnership may dissolve. A buy/sell agreement may be included in the articles of the partnership to allow the

Location- Similar to the General Partnership, the Limited Partnership may be moved to another state easily. A new DBA filing must be made in the

A Limited Liability Partnership Alternative Security Provision transmittal form must be filed as well. Once these documents are approved, the Secretary of State will return stamped copies of the forms as well as a Certificate of Registration to the partnership.

Convenience/Burden: Limited Partnerships have extra requirements placed upon them to comply with state regulatory requirements. They must maintain a registered agent to represent them in the state in which they were formed. They are also required to file an informational report with the IRS of the profits passed to the general partners.

Limited liability partnership (LLP): In a LLP no general partners exist, only limited partners exist to create the business as a limited liability under this form of partnership. LLP’s are typically used for any professional type of business where all partners/owners (a minimum of two are required), have a voice in the taxation structure of the business.

Forming an LLP begins with filing articles of partnership with the secretary of state of the state in which the LLP is organized. The LLP laws of the state where the LLP performs business govern the partnership. The partnership must follow the state laws and regulations to continue performing business in that state. Many states require an LLP to carry a minimum of $1,000,000 in liability insurance covering negligence, wrongful acts, or misconduct by partners or employees. Taxation of the LLP is the same as in a general partnership. Each partner is required to file their profits or losses on their personal income tax return. As with a general partnership, an LLP is required to file an information return with the government so the income or losses are traceable to the individual partners.

Then the agreement can include clauses about Interest on Capital, Financial Decisions, Profit and Loss would be an important one to include, Books of the Account (since in one of the case studies one of the partners was mismanaging their books), Annual Reports, Management, Transfer of Partnership Interest, or Voluntary/Involuntary Withdrawal of a Partner. Also, this agreement should include liability, governing law, definitions, and miscellaneous.

Another business structure to establish is Limited Partnership, which is similar to the partnership with a slight difference where it formed with at least one general partner and one limited partner. The general partners have the same obligation as partners in a general partnership; however, limited partners have limited liability to the extent of their contribution. The advantage of this business formation is the limited personal liability for individual partners for the acts of another partner within the organization. It has the same tax consequences as a general partnership. One important positive aspect is management and control aspects of the organization could be divided or separated among partners. It’s shortcoming, a general partner is still personally fully liable for the debts of the business. If the limited partner wants to become active in the business, he/she may assume the personal liability obligation.

A few types of businesses generally cannot be LLCs, such as banks and insurance companies. Check your state’s requirements and the

General partners manage the business and are subjected to unlimited personal liability as they would be in a general or full partnership. Limited partners have no liability beyond their investment, provided they remain as limited partners. Limited partners may not participate in the management of the business (P. 609). (Rothenberg & Melnikova, 2003)

Limited liability companies possess characteristics of both partnerships and corporations. Like a partnership, an LLC is a pass-though entity for tax purposes. Many businesspeople find this feature particularly appealing because of the avoidance of double taxation. On the other hand, members of LLCs enjoy limited liability as do the shareholders of a corporation. Where owners of a corporation are called shareholders, the owners of an LLC are referred to as members. In most states, members may include individuals, corporations, and other limited liability companies. Like a corporation, most state statutes do not place a limit on the number of members comprising an LLC, and all fifty states allow for a single-person LLC, i.e., only one member.