Partnership in business is common thing. However, not many entrepreneur understand the importance of it and how to make it work to their benefit. It is important to understand that partnership in business means formal arrangement to manage or operate business as well as share its profit between two or more parties. In business itself, partnership is not limited into one type. There is variety of partnership types in business you should know so you can also choose which one suit you the best. In some parts, liabilities and profits are shared between partners rather equally. However, there is also type of partnership that makes partners have limited liability. Thus, different type of partnership means different arrangement between partners involved.
Partnership in business and its role
Partnership is a matter of choice. It is not an obligation. When you run your own business, you can choose to work independently or choose a partner. However, partnership bring more benefits more often than not. That’s why, it is common thing as majority of business goers always include partnership in various ways. There are those who choose proactive partnerships and there are some who choose silent partners. It depends on what you really need of partnership for your business.
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What is partnership?
Partnerships are done by two parties or more to reach particular goal. When you share the same goal, it is easier to join partnership because it means you can work together and make your goals true more efficiently and effectively. The goals of partnership itself is always varied widely. Basically, there are three main categories in partnerships. They are general partnership, limited partnership, and limited liability limited partnership. Each of them has its own characteristics and arrangements.
Legal and financial liability
As for general partnership, legal and financial liability are shared equally to all parties. Each party shares personal responsibility for the debts resulted from the partnership. They also share profit equally. Besides, everything is written in legal partnership arrangement to make every aspect of partnership clear. About the content of the arrangement depend on all parties. Each may demand different arrangements but one way or another, they should come into one agreement.
What is a Limited Partnership?
Limited partnership is a mixed form of general partnership and limited liability partnership. In this arrangement, one party is on the role as general partner and the other is silent partner. As for limited liability partnership, the arrangement usually limit partner’s personal liability. This type of partnership usually takes in a common structure for professionals such as architects, lawyers, accountants, etc. In this type of partnership, the assets of other partners are not at risk even if one partners is sued for malpractice (for example).
Liability limited partnership in business
The last one is limited liability limited partnership which is a bit hard to digest. This is particularly new in business practice so it’s kind of uncommon. In this type of partnership, the arrangement provides a greater shield from liability for its general partners. Since it is a little unique, there is not much of practice of it in business variety. Most common partnership in the field is general partnership.