A company is defined to be a partnership if the business is owned by two or more individuals who are sharing profits and dividing losses among the partners. The profits and losses may either be divided equally or in a predetermined proportion that is mentioned in the partnership deed. The partnership deed is a legal document that details the financial relationship between all the partners or owner of the business. Just like sole-proprietor companies, partnerships are easy to set up a run-in comparison with larger companies.
Types of Partnership Registrations:
According to Company Law in the United States of America, there are three main types of partnership types:
1. General Partnership:
For this type, there is no requirement to register with any state agency. The partnership is automatically created when the partners begin business activities.
This type of partnership also typically has a lower cost of operation. Since they do not need to be registered, they do not need to pay filing fees, ongoing state fees or franchise taxes. However, they are still required to obtain all relevant licenses and permits for their business operations.
This type of partnership also has fewer requirements. They do not need to hold annual general meetings, issue partnership interest or keep personal and business assets separate.
2. Limited Partnership:
· In this type of partnership, one partner at the minimum is required to have unlimited liability – which means that even the personal assets of the partner can be used to settle the company’s debts. The other partners however, can have limited liability, which means that their personal assets will remain safe.
· And another advantage these limited partners have is that they do not need to be involved in the day-to-day activities of the business. Limited partners basically act like silent investors.
Limited partnership is mostly used for special situation instead of regular business operations. the production of movies how many estate planning are often classified as limited partnerships.
3. Limited Liability Partnerships:
Limited liability partnership can only be created by individuals of a certain professional degree such as accountants, lawyers, dentists, doctors, and other professions specified by each State’s law.
Under this type of partnership, the personal assets of the partners cannot be used to settle the debts of the company.
Also, under this type of partnership, partner cannot be held liable for the misconduct or negligence of the Other partners. liability partnership are hybrid of the structure of companies and partnerships.
In conclusion. there are three main types of partnership that vary depending on the purpose for which the business was created and the extent of liability the partners will have to endure.