Business can be conducted through different entities. Sole proprietorship, Partnerships, Limited Partnerships, Corporations for profit or not for profit, Limited Liability companies are the main type of business entities. In these the Limited Liability Company or LLC is a relatively new addition in many states. The type of entity for doing business in any state should be chosen as to get the maximum benefit and carry minimum risk for the business owner.
A partnership business is where two or more individuals join together to run a business for profit. There are no formal filing requirements for a partnership business. But as it is a joint business between two or more individuals it is prudent to have a written understanding between for any eventuality. In partnership, all the partners and their personal assets are liable for business debts and obligations. This means that a partner’s property and cash can be attached or liquidated for payment to a creditor or lender if the partnership business defaults in paying such obligations. The exception to this is the limited partnership.
Limited partnerships limit the liability of some partners to a pre agreed amount in case of a business failure. Only the general partner who is responsible for running the business is personally liable for the business obligations. Family limited partnership is only an extension of this. The only difference is that, in a family limited partnership, the partners are all members of the family. Usually the generally partner is either of the parents or the dominant member of the family and others limited partners. Family limited partnerships are formed to protect the assets of the family from the obligations and debts of family business. These partnerships are preferred by established family concerns to that of a small business incorporation as most of the advantages and few of the disadvantages of a corporation is present in limited liability partnerships.
Most states have adopted the Uniform Partnership act and the partnership law is governed by the state laws. Forming a partnership does not involve the formalities need to start a corporation. A partnership is usually the result of an implied or express contract between partners and requires no formal documentation. A court may decide on the existence of the partnership based on the primary intention of the parties, profit or loss sharing, investments by partners, control or administration of the business or joint ownership of business assets.
