What Are Examples Of Business Partnerships?

[Borrowdale Barron]

What are some examples of business partnerships including their advantages and disadvantages?

 

[Queen]

A partnership is a business legal entity in which there are two or more participants agree to get involved in doing business together in order to make profits.

So put into another perspective, the minimum requirement for a partnership organization to exist is that there should be at least two or more people in association with this business structure.

Now when it comes to business partnerships there are a few number of different partnerships out there and these are:

• General Partnership
• Limited Partnership
• Limited Liability Partnership

 

[Borrowdale Barron]

Now when it comes to business partnerships there are a few number of different partnerships out there and these are:

• General Partnership
• Limited Partnership
• Limited Liability Partnership

What is a general partnership business then?

 

[Queen]

What is a general partnership business then?

A general partnership or a traditional partnership is a default legal entity were two people decide to carry some form of business activity for an intended profit.

In a general partnership business structure both partners share profits and are also responsible in the day to day running of the business. So it's pretty much like sole proprietorship except there are now two people involved.

Keep in mind in most countries to form a general partnership there is no need to file the business since this can be done through a "verbal agreement" or a "handshake agreement".

General partnership comes with unlimited liability meaning if your partner takes a loan you will also be liable for your business partner's actions.

N.B. Each partner has unlimited personal liability, which means that any or all of each partners' personal assets can be taken in a lawsuit because partners are wholly responsible for all debts in this business structure.


Advantages of General Partnerships:

• A general partnership is easy to establish and set up because of less paperwork required.
• General partnerships don't have to pay income tax.

Disadvantages of General Partnerships:

• There is personal liability for all business partners in the event that the general partnership business fails.
• One partner can not transfer their ownership stake of the business without the consent of other business partners.
• General partnerships may often result in management issues when they disagree with other business partners.

 

[Borrowdale Barron]

What about a limited liability partnership?

 

[Queen]

What about a limited liability partnership?

A limited liability partnership is essentially a business partnership were these partners have limited liability meaning their personal assets will not be used to settle debts.

So from another perspective we can say a limited liability partnership combines the features of limited company and that of a traditional partnership.

However, in a case were there is clearly business malpractice carried out by both partners this can result in a decision in which business partners will be forced by law to sort out their obligations.

Limited liability partnerships are taxed such that profits are treated as personal income of the members.

An example of people who usually set up limited liability partnerships include accountants, lawyers, doctors and engineers. Nevertheless, other people are also free to set up a LLP company if it suits their needs.


Advantages Limited Liability Partnership

Limited liability partnership (LLP) has it's own advantages and disadvantages as a business structure. And for this reason it's important to carefully consider the pros and cons of setting an LLP company.

Let's now look at what some of these advantages are for limited liability partnerships:

• Personal liability is protected due to the business structure having limited liability
• Members of the business partnership are taxed individually rather than paying corporate tax.