A partnership firm works well as long as the partners have a healthy working relationship. It’s when this relationship starts deteriorating that partnership disputes arise which in turn affects the business’s financial health and goodwill in the market. We at the Law Offices of J. Scott Bennett help partners resolve their disputes by protecting their individual financial interest and reducing any negative impacts on the business’s financial health.
A partnership generally consists of two or more people who work together for profit. It’s actually a good idea as they can discuss and share ideas while splitting all business associated costs and work.
The problem is that you also have to split your profits, which is okay if both partners understand each other well and know their responsibilities. If you and your partner don’t get along well together, or if you are handling most of the workload because of your partner’s responsibly, then it proves to have a negative impact on your business. Besides partnerships are not taxed but as its profits and losses reach the partners, they are subsequently taxed for it.
A general partnership is a basic and default form of partnership where profits and losses are equally shared, just like management rights, responsibilities, and any incurred partnership liabilities. All partners are also individually and equally liable for partnership debts and obligations. While these are the default terms of a general partnership, it can be changed by agreement.
Limited Partnership (LP)
Limited partnerships have two types of partners- a general and limited partner, where there has to be at least one of each. While the general partner’s responsibility is to run the business, the limited partners are not involved in its management. So while the general partner is liable for the business’s debts and obligations, the limited partners are liable only for their investment.
Limited Liability Partnership (LLP)
In case of an LLP, all partners help in the business management while having the benefit of limited liabilities. However, it’s only accountants, architects, and lawyers who can adopt this partnership structure in California.
Limited Liability Limited Partnership (LLLP)
The LLLP is similar to a limited partner. The difference is that the general partners are protected from limited liability. This partnership, however, cannot be formed in California but out-of-state LLLPs that are registered with the Secretary of State can do business here.
While all these partnerships have similarities like filing requirements and tax treatments, the difference lies in liability protection and partners rights. You have to choose and decide based on your individual business goals. No matter which partnership you choose, it’s important that each partner’s role is clearly mentioned in the partnership agreement.
So if you are thinking of starting a business with someone else, it’s important you do it with a partnership. This is where we at the Law Offices of J. Scott Bennett can help you. We will not only give you the necessary advice but also help draft a good partnership agreement keeping everyone’s interests in mind and also provide our continual legal support. If you are interested in finding out more about our partnerships services and expertise please call us at 951-434-1151 to schedule a free consultation.