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What types of partnerships can you establish for your business?

A couple of months ago, we wrote a post about the many different types of business you can establish. These types include corporations, partnerships, sole proprietorships, co-ops, and limited liability companies to name a few. But today, we want to dive into the different types of partnerships you can have.

A partnership is established when two or more people co-own a business and share in the profits and losses of that business. The multiple parties in the partnership may contribute ideas, financial backing, property, or any combination of these things. When a partnership is established, deciding which type of partnership is important. There are general partnerships, limited partnerships, and limited liability partnerships (LLPs).

A general partnership is when two or more people carry out the responsibility of a business. They both share in that responsibility, and each partner is responsible for the debts and obligations of the company.

Limited partnerships shields the individual partners more than in a general partnership set-up. Under a limited partnership, each partner is only liable for the business in relation to how much he or she invests in the company. One partner, though, must accept general partnership status in a limited partnership set-up. As such, they are more susceptible to risk, but the general partner in a limited partnership retains control of the business.

Limited liability partnerships, or LLPs, offer tax advantages to the partners under the general partnership while also offering liability protections similar to the limited partnership. However, the IRS may apply tougher tax rules to your business as a result.

Source: FindLaw, "Types of Partnerships," Accessed July 20, 2017

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