There are different types of partnerships, including General Partnerships, Limited Partnerships, and Limited Liability Partnerships.
A General Partnership is an association of two or more persons to carry on as co-owners a business for profit. There is no formal filing requirements to form a general partnership. The key drawback of this type of entity is that the general partners have no personal liability protection from partnership liabilities.
A Limited Partnership (LP) is an association of two or more persons formed by a formal filing with the State, which has one or more general partners and one or more limited partners. The general partners have no liability protection, but the limited partners are protected from business liabilities. However, in order to avoid business liabilities, the limited partners must not actively participate in the business.
A Limited Liability Partnership (LLP) is formed by a formal filing with the State, and partners have some protection from liabilities generated by the negligence, wrongful acts, or misconduct of other partners, employees, or representatives. However, partners may not be protected from liability to third-parties.
Partnerships, LPs, and LLPs may elect to be taxed as a C-Corporation or as a pass-through entity.
Our attorneys can help you decide if a partnership entity is right for your business.