What is a General Partnership?
A general partnership is a business entity in which two or more “general” partners hold an equal share in the profits, losses, and ownership of their business. Each general partner has the full capacity to run the day-to-day operations of the business and may enter contracts on behalf of the partnership. However, with great power comes great responsibility—general partners are held personally liable for the full amount of any debts, judgments, and losses the partnership faces.
How is a General Partnership Formed?
A general partnership is formed when two or more people operate a business for profit, even if there is no explicit agreement to form a general partnership between the parties. Therefore, unlike an LLC or a Corporation, forming a general partnership does not require a formal filing with the state. However, to avoid any potential conflicts or liabilities that may arise in the partnership, partners should create a formal partnership agreement in writing. A typical partnership agreement will detail the roles, ownership stake, and responsibilities of each partner. Our office specializes in drafting partnership agreements that best reflect the nuances and goals of your business.
What is a Limited Partnership?
A limited partnership is a business arrangement with at least one general partner and one limited partner. Like in a General Partnership, there must be at least one general partner to run the day-to-day operations of the business. Because they have full control over the business, general partners may be held personally liable for the full amount of any debts, judgments, and losses the business faces. But limited partners, sometimes referred to as “silent partners” or “capital partners,” have no say in the day-to-day of the business. In exchange for giving up control, limited partners generally cannot be held personally liable for any claims or losses the business faces. Limited partnerships are best suited for people who wish to maintain control over their business as a general partner but need the flexibility to add limited partners for capital investments.
How is a Limited Partnership Formed?
Unlike a general partnership a limited partnership must be registered with the state. Our firm has helped many clients establish their limited partnerships. If you think a limited partnership may be best for your business, we can work with you to develop a plan to form your business and file it with the appropriate state authorities.
