Before you look for the types of the partnership business, have this quick read about what partnership in business actually is. It won’t be wrong if we compare this structure to marriages and that too with comparable reasons.
It is a specific kind of legal relationship in which two or more people agree to be co-owners to carry out a business plan. On the basis of these individuals’ mutual interest to carry out a business plan, an agreement is formed legally. It could be a group of a minimum of two up to twenty individuals sharing ownership.
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Business Entities vs Partnership Business:
Sole Proprietorship doesn’t have a separate existence from its owner and is liable for losses and profits. Which eventually becomes a discouraging factor for people to pool in their time and capital.
Whereas, partnerships are generally called to be the easier and most practical in the world of the corporation. If we talk about the types of the partnership business, all the types are advantageous in terms of lower taxes as compared to the corporation and other business structures.
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Guide to Form Legal Partnership:
If you are self-assured about your type of business structure and seeking guidance to form a legal partnership. Follow the given step to step guide.
- Choose a structure: The first important step towards a successful and lasting work tie_up is based on the focus and clarity of research on which the co-owners will further build on to flourish the type of business they intend to carry out.
- Name your business: This sounds a fun factor yet the most tiring part of the process where individuals look for a unique name that is also available to use for the new business structure.
- Partnership agreement: The business can be carried out in one or multiple states, choose the state where the level of demand and attraction is high for the type of business you intend to carry out.
- Registration process: With the license, the most required step of the process is registration and submission of application. For this generally registered agent is hired to take care of the documentation and application approval in a permanent partnership in business.
And Finally, Types of Partnership in Business:
All four types of partnership business are listed and discussed below for a better understanding which will help you to choose the best for you.
- Limited Partnership (LPs):
The most attractive part comes with the limited partnership including the option of passive investors in partnership business. This means that the business structure provides a platform to the individuals who can not be actually active in working as co-owners but can make investments passively and enjoy their share of benefits easily.
- Limited Liability Partnership (LLP):
In this type of partnership business, all the co-owners have limited financial liability for business debts, profits, and losses. Which means the partners are only liable for the investments they have pooled in the business. Where on the brighter side of the picture it sounds great to have less responsibility, the other side gets gloomy by having very little control over the business.
- Limited Liability Limited Partnership (LLLP):
This type (LLLP) is not offered in all states. The pattern is designed somewhat like LP. It is not considered to be very likable and practical in most of the states as it is taken as unsafe and less recognized in terms of liability protection tested by the courts.
- Basic Partnership:
This is the most basic and general form of partnership business in which the co-owners decide to work together in an already established business or to build on the new structure choosing their suitable type. They simply sign agreements with mutual understanding and do not involve any entity with the state. Co-owners mutually share the power and the liability.
To Conclude, we can say that partnership business has multiple types out of which the basic type is considered to be the simplest but LP, LLP, and LLLP each have a unique pattern. All the types come with their own pros and cons. The best way to decide for yourself is to gather all information and be self-assured of your business type and structure before you choose the co-owners to work together for your goals.
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