What Is A Limited Partnership?
A limited partnership is a creature of statute, which means it must be created in accordance with the statutes, filed with the Secretary of State, and the fee paid. Liability is not limited until filed. It is used most frequently to allow a person to invest in a business, share in its profits, avoid unlimited liability that is involved in a general partnership, and limit risk to the amount invested.
One may wonder what a partnership is and how many kinds of partnerships exist in the world of business. Simply defined, a partnership is the joining of who (or more) people to further the interests of a business. There are three types of partnerships to know of: limited partnerships, general partnerships, and limited liability partnerships.
A limited partnership has two types of partners: general partners and limited partners. A general partner has no limited liability and is exposed to all liability of the partnership, regardless of his ownership interest. The income and losses of a limited partnership flow through to the partners. The second type of partner in a limited partnership is a limited partner, who is not subject to the same amount of personal liability for the obligations of the partnership. A limited partner is typically liable only to the point of his investment and is not involved in the day-to-day business and operation of the partnership.
- Limited partnerships, like general partnerships, should have a written partnership agreement. Contact a limited partnership attorney in Monroe, NC to learn more about limited partnerships.
What Are the Pros and Cons of a Limited Partnership?
Each type of partnership has it’s own unique list of pros and cons and one type of partnership may fit a business venture better than another.
- Sharing of Responsibility: With a limited partnership, the responsibility and liability are shared between the partners. This also means the partners cannot be held liable for any amount beyond what they contributed to the business.
- Sharing the Workload: Working with a partner allows for a share of work. Running a sole proprietorship often ends up with one individual taking on all of the work of the business. With a limited partnership, each member can divvy up the work, and responsibilities, and ease the stress on each other.
- Tax Advantages: Despite not being a large corporation, setting up a limited partnership can bring about many tax breaks and other advantages.
- No Turnover Issues: If a partner has to leave the company behind, it does not require dissolving the partnership.
- Possibility of Disputes: Working with others often proves to be a difficult feat. Opinions may differ, goals can change, and commitment may falter. Dealing with these types of issues can spark disputes between the partners.
- General Partner Liability: In limited partnerships, the general partner is personally liable for the debts the company incurs. If the company faces a lawsuit or bankruptcy, the general partner typically bears all the weight.
- Increased Accountability: With a limited partnership, your investors are the limited partners and are to be reported to on a regular (typically annual) basis. Limited partnerships require less documentation than that of large corporations, however, the general partners should remain up-to-speed on all business activities and keep investors informed at all times.
- Limited Sway for Limited Partners: Due to limited partners not having as much liability compared to the general partners, limited partners tend to have less of a say in the business’s decision-making.
Work with our Monroe Limited Partnership Lawyers For Your Business Needs
Starting, running, and maintaining a business can be difficult. It’s crucial to understand all your legal rights in a limited partnership either as a general partner or as a limited partner. Our Monroe business lawyers have extensive experience assisting all types of partnerships and helping individuals know and understand the legal side of their business. If you find yourself in need of assistance with a limited partnership, contact our firm today at 704-289-2519.
With over 140 years of combined legal experience, you can trust your case with us.
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