Partnership. Types of partnerships in the USA
Partnership is the simplest structure for two or more people, to create and manage business together. Partnership is not only a company, but often a kind of association of enterprises, although some partnerships must be officially registered. Partners sing a partnership agreement.
A partner can be not only a physical person, but another company as well.
Types of partnerships:
- General Partnership (GP) – full partnership. All partners are equal, they have the same rights and obligations. Liability is joint and several – each participant is fully responsible for the actions of the other. No need to incorporate (no need to register officially). It is enough to conclude a partnership agreement.
GP is used in the joint activity of two or more persons who will make maximum efforts to achieve the goal, because the partners bear full responsibility for the enterprise with all their property.
- Limited Partnership (LP) – limited liability partnerships have one or more general partners with unlimited liability and all other partners have limited liability. Limited partners also have limited control over the company, which is documented in the partnership agreement. Liability is limited to the actions of other partners, but in general, if the partnership incurs debts, all partners will be liable to the extent of their contributions. The general partner will be responsible for all of its assets.
Profits are remitted to personal tax returns, and the general partner must also pay self-employment taxes. The LP must be incorporated, that is, officially registered.
LPs are often used to run a family business, where the members of the partnership will have a share, but will not have an influence on the management of the company (only receive profits from their share) and one partner will be general – fully responsible, but also have the right to make decisions himself. Also, this form is suitable for real estate projects and other business tasks.
- Limited Liability Partnership (LLP) – LLPs are similar to LPs but share the liability of each partner. The LLP protects each partner against the debts of the other partners of the LLP. Each member of this type of company is liable for their actions to the extent of their share, but some states may have exceptions and other partners may be liable for the LLP, for example, for the willful misconduct or negligence of one of the partners. In this case, the guilty party may even bear full personal responsibility. At the same time, the liability of other partners will be limited to the amount of the contribution.
As a rule, LLPs are used for joint professional activities by associations of lawyers, doctors, accountants and other professions whose activities are subject to licensing. And the separation of responsibilities allows you not to worry about your personal share in the partnership.
- Limited Liability Limited Partnership (LLLP). In this type of partnership, the general partners receive the same level of liability protection as members of an LLP. In the United States, LLLPs are a new type of legal entity and are considered a modified version of LLPs.
When an LLLP is formed, there will be at least one general partner and at least one or more limited partners. General partners take on management roles, while limited partners will have the role of investors in the company.
LLLPs are not permitted in all states. In states where it is legal to form an LLLP, there are generally two ways to form one. The law expressly authorizes the formation of an LLLP, or a limited partner applies for limited liability protection under a state that recognizes an LLLP. This type of partnership can be registered in 20 states, including Wyoming, Delaware, Nevada, Arizona, Florida and others.
LLLPs are not a common type of business and are generally only found in real estate.
| Advantages | Disadvantages |
| + Easy to set up | – Unlimited liability (except for LP and LLP) |
| + One level of taxation | – Object of self-employment tax (15.3%) |
| + Partners can deduct expenses from income for tax purposes | – To enter another partner, it must be approved by all partners |
| + It is possible to make special allocations – this is the distribution of income that is not relevant to shares. | – Each partner is jointly and severally liable, i.e. is fully responsible for all debts and obligations (for
excluding LP and LLP) |
| + Any type of company can be a partner | |
| + No tax on dividends | |
| + As a rule, it is not necessary to officially register (in some states it is necessary) | |
| + Partners have a direct influence on partnership management, unlike shareholders in corporations |
* special allocation butt, 2 sponsors invested equally at 50%, but they can also increase special allocation and distribute the income from another partner, hit 100/0.
Joint venture is two or more businesses, as a rule, but not exclusively, in the form of partnerships, as if to unite their efforts for the creation of a business project or the start of a new one directly in the business. Often a joint venture can be considered as one of the types of partnerships.