A partnership is one of the oldest forms of business ownership. There are two main types of partnerships: a General Partnership and a Limited Partnership.
A General Partnership is governed by its partners. These partners often each share managerial power and responsibility. A General Partnership does not limit the liabilities of the partners. Each partner is responsible for the actions of the Partnership and the other partners.
A Limited Partnership does help limit the liability of the limited partners. Limited Partnerships (“LPs”) have two classes of partners: general partners and limited partners. One or more general partners control the partnership and have management power and responsibility. The general partners do not have limited personal liability. The limited partners have limited personal liability for the LP because they do not have management authority.
A General Partnership is easy to form and requires few formalities. Since partners share decision-making powers, the governance structure can encourage an environment of collaborative management and shared responsibility that many startups and small businesses find appealing. Also, the tax treatment for partnerships can be beneficial.
A drawback to General Partnerships is that they do not help to limit personal liability. Also, if there are many partners, then decision-making can become unwieldy and slow.
A Limited Partnership requires more paperwork to form than a General Partnership. It is an excellent structure to accommodate passive investors (the limited partners) who want someone else to run the day-to-day operations of the partnership and manage their investment (the general partners). LPs offer investors a way to limit their risk to the amount of their investment in the LP. They also can give more control to those partners who are designated the general partners. LPs are often used for real estate investments, but they are widely used in other contexts too.
- Is a partnership right for me?
- Advantages and disadvantages of partnerships
- Limited Partnership vs. General Partnership vs. Corporation vs. LLC
- How do I use my partnership to protect myself from personal liability?
- Partnership formation and startup
- Limited Liability Partnership formation (for professional services organizations)
- Get an EIN (Employer Identification Number), aka “Tax ID Number”
- Prepare organizational consents, resolutions, and meeting minutes
- Help with regulatory approvals for partnership
- Prepare Buy-Sell Agreements
- Change a partnership’s name or registered address
- Agreements to add or remove partners
- Change Partnership Agreements
- Buy or sell partnership interests
- Establish different classes of partners
- Mergers and reorganizations
- Dissolutions of partnerships
A Partnership Agreement establishes rules for how the partnership will be managed.
Partnership Agreements may also contain a “buy-sell” agreement that imposes restrictions on the addition of partners and on the transfer of partnership interests. A buy-sell agreement usually contains price-setting mechanisms and procedures for permitted transfers. It also may give the other partners a right of first refusal to purchase a selling partner’s interest.
Our services include:
- Preparing custom Partnership Agreements
- Negotiating Partnership Agreements
- Buy-Sell Agreement preparation and negotiation
Unlike online formation services, we’re here for you with legal advice before, during, and after your partnership formation, and throughout the business lifecycle.
Why wait? Start Your Partnership Now.