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Business Partnership Structure

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Partnership Structure

There are three general types of partnership arrangements:

General Partnerships assume that profits, liability and management duties are divided

equally among partners. If you opt for an unequal distribution, the percentages assigned to each

partner must be documented in the partnership agreement for its validity.

Limited Partnerships (also known as a partnership with limited liability) are more

complex than general partnerships. Limited partnerships allow partners to have limited liability

as well as limited input with management decisions. These limits depend on the extent of each

partner’s investment percentage. Limited partnerships are attractive to investors of short-term

projects.

Joint Ventures act as general partnership, but for only a limited period of time or for a

single project. Partners in a joint venture can be recognized as an ongoing partnership if they

continue the venture, but they must file as such.

Advantages of a Partnership

Easy and Inexpensive, Partnerships are generally an inexpensive and easily formed

business structure. The majority of time spent starting a partnership often focuses on developing

the partnership agreement.

Shared Financial Commitment, In a partnership, each partner is equally invested in the

success of the business. Partnerships have the advantage of pooling resources to obtain capital.

This could be beneficial in terms of securing credit, or by simply doubling your seed money.

Complementary Skills, A good partnership should reap the benefits of being able to

utilize the strengths, resources and expertise of each partner.

Partnership Incentives for Employees, Partnerships have an employment advantage

over other entities if they offer employees the opportunity to become a partner. Partnership

incentives often attract highly motivated and qualified employees.

Disadvantages of a Partnership

Joint and Individual Liability: Similar to sole proprietorships, partnerships retain full,

shared liability among the owners: Partners are not only liable for their own actions, but also for

the business debts and decisions made by other partners. In addition, the personal assets of all

partners can be used to satisfy the partnership’s debt.

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Table of Contents Partnership Structure There are three general types of partnership arrangements: General Partnerships assume that profits, liability and management duties are divided equally among partners. If you opt for an unequal distribution, the percentages assigned to each partner must be documented in the partnership agreement for its validity. Limited Partnerships (also known as a partnership with limited liability) are more complex than general partnerships. Limited partnerships allow partners to have limited liability as well as limited input with management decisi ...
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