What is a business partnership?

A partnership is a business structure where two or more people join to run a company. A partnership is not a legal entity; it only exists between the partners. 

Partnership alliances form when two or more people agree to pursue a business opportunity together, even if they do not have any capital. The partners each contribute money, property, and labor to the business and share profits and losses.

What type of legal entity is a partnership?

Partnerships can be either general partnerships or limited partnerships. Public partnerships are usual among small businesses that don’t expect to raise outside capital from investors.

In a general partnership, all partners are entirely liable for all the business debts, so personal assets may be at risk if the company goes bankrupt.

Limited liability companies (LLCs) offer some protection from this risk because members of an LLC are usually only liable for their actions and not those of other members or managers in their businesses.

Common Business Structures:

• Corporation. 
• Limited Liability Company (LLC) 
• Limited Partnership (LP) 
• General Partnership (GP) 
• Limited Liability Partnership (LLP) 
• Sole Proprietorship

Why would a business choose to be set up as a partnership?

Tax efficiency. Partnerships (including limited liability partnerships) are not subject to tax at the entity level. Instead, taxed income is in the hands of the partners based on their share of ownership in the business.

Taxed income can be more beneficial to some businesses because it can reduce their overall tax burden — especially if there’s a high level of turnover in their business or if they have high personal income.

Access to capital. Limited liability companies (LLCs) and S corporations (S corps) need an initial cash investment before starting a business. In contrast, partnerships don’t require any initial capital investment from outside investors since all partners contribute assets directly to the company itself. 

However, this doesn’t mean that partnerships don’t have access to capital — they tend to find their money from other sources like banks or angel investors instead of getting it all upfront from one source like LLCs do with venture capitalists or S corps with banks or private equity firms.

Entrepreneurial freedom and flexibility. Entrepreneurs often prefer partnerships because they offer Tax efficiency. Partnerships (including limited liability partnerships) are not subject to tax at the entity level. Instead, the income is taxed in the hands of the partners based on their share of ownership in the business.

This can be more beneficial to some businesses because it can reduce their overall tax burden — especially if there’s a high level of turnover in their business or if they have high personal income.

Access to capital. Limited liability companies (LLCs) and S corporations (S corps) need an initial cash investment before starting a business. In contrast, partnerships don’t require any initial capital investment from outside investors since all partners contribute assets directly to the company itself.

However, this doesn’t mean that partnerships don’t have access to capital — they tend to find their money from other sources like banks or angel investors instead of getting it all upfront from one source like LLCs do with venture capitalists or S corps with banks or private equity firms.

Entrepreneurial freedom and flexibility. Entrepreneurs commonly choose partnerships because they offer more freedom and flexibility than corporations do. This is especially true when it comes to startups, which are often run by small teams of people with a shared vision for the future of their business.

In this situation, partnerships offer more entrepreneurial freedom than LLCs or S corps because they have fewer formal rules or restrictions on how partners can contribute to the company’s operations.

Benefits of a Partnership?

Partnerships are an excellent way to start a business. They allow people with different skill sets and interests to come together, pool their resources, and build something great. But partnerships are only suitable for some.

So how do you choose a good partnership structure?

 It depends on your goals and needs and the number of partners involved. Here are some questions to consider when choosing a partnership structure:

Do you want to protect yourself from liability? If so, limited liability companies (LLCs) may be your best bet. These businesses defend their owners from personal harm for any debts or lawsuits against the company unless they were directly involved in causing them or did something illegal themselves.

Do you want to raise capital from investors? If so, corporations are better suited for your needs since this is what most investors look for when considering investing in a company. 

Resources for moving forward:

• Guided resources to help you register your business with state and federal agencies 
• Hire professionals to help you register your business with state and federal agencies 

Personal Assistant Plus offers business development solutions for Limited Partnerships. We can help you start your company with online registration assistance, saving time and hassle as you don’t have to mail any paper documents, wait for your legal documents to arrive, and then wait for them to be signed before submitting them. You register online and submit your documents electronically.

Contact us today for more information. If you are looking for assistance, we can help! Personal Assistant Plus is an online business development solution that offers various services to Limited Partnerships. We have years of experience in the professional industry and know how to take care of our client’s needs. We aim to ensure everything goes according to the plan, so you don’t have any surprises with your Limited Partnership. Contact us today if you need assistance with starting or managing your company! Thanks for visiting our blog!