Business Structures 3 | The Biz Knows

Business Structures cont

Cons of General Partnerships

• Like sole proprietors, the owner(s) personal assets are not protected because the company and the individual are treated as one entity

• Note: this can be overcome to some extent by using the limited partnership structure. However, a general partner must always assume all liability

• All partners are liable jointly and severally for all obligations of the partnership unless agreed by the person suing the partnership or the partner

Limited Partnership: The Limited Partnership business structure may provide limited liability for some partners. At least one general partner must acts as the controlling partner and one limited partner whose liability is normally limited to the amount of control or participation of the limited partner. General partners of a Limited Partnership have unlimited personal liability for the partnership's debts and obligation. To form a Limited Partnership, the members must usually file a Certificate of Limited Partnership with the Secretary of State.

Limited Liability Partnership: The LLP business structure is generally reserved for a group of accountants or lawyers. LLPs must register with the state. Generally having to file paperwork yearly and pay LLP fees.

Business structure example: Two people who work together who contribute to the enterprise are partners if they both agreed that they will put something of value into the business and get something out of the business. They share the profits and losses of the business. People who are partners know they are in a partnership. Generally, these partners have a formal agreement but an agreement is not necessary to have a partnership. Most law firms and accounting firms are partnerships.

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