What is a Limited Partnership?

A limited partnership (LP) is an association of one or more general partners together with one or more limited partners to conduct business for profit as co-owners. The most important feature of a limited partnership is the limited partner enjoys limited liability as long as s/he does not participate in the control of the partnership business.

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What Is a Limited Liability Partnership?

A limited liability partnership (LLP) is an entity that allows its members to take an active role in the business of the partnership without exposing them to personal liability for others’ acts, except to the extent of their investment in the LLP. In some partnerships, often called general partnerships, individual partners are liable for each other’s debts and obligations. An LLP provides each of its individual partners protection against personal liability for certain partnership liabilities.

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Benefits of a General Partnership

A general partnership can provide a business with structure and control in addition to other benefits. In most general partnerships, profits are shared equally among the partners. Typically, partners will sign a contract at the commencement of the general partnership which outlines how profits and losses will be divided. As asset protection vehicles, general partnerships are not an ideal choice, since they do not offer limited or severable liability. Each partner is responsible for the actions and liabilities of every one of the other partners. A general partnership is intended to distribute risk as well as managerial flexibility.

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What are Some Common Types of Partnerships?

The most common types of partnerships include a partnership, limited partnership, limited liability partnership, and limited liability company. The type of business that you operate determines issues such as the extent of personal liability that you have from the business and how the business is taxed, among other things.

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What is a General Partnership?

In business, when you hear the word “partnership,” it normally refers to a general partnership. In a general partnership, there are two or more partners. Each is liable for any debts or judgments taken on by the business. There is no limited liability, which means all the partners’ assets can be taken in a lawsuit or be targeted to settle debts should the partnership become insolvent. Any partner can be sued for the full amount of business debts.

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