Limited Partnership Business Info
LP stands for Limited Partnership which is different from a General Partnership (or just "partnership"). A limited partnership allows for limited partners and general partners. A limited partner is one who invests, does not participate in running the partnership, and is liable only up the amount of his investment. A Limited Partnership must have one or more general partners who manage the business and who are personally liable for partnership debts. Although one partner may be both a limited and a general partner, at all times there must be at least two different partners in a Limited Partnership. A Limited Partnership must file with the state. General Partnership Business InfoA general partner may or may not invest, participates in running the partnership and is liable for all acts and debts of the partnership and any member of it. A General Partnership does not have limited partners.
For a General Partnership, there is no registration with the state or even written agreement necessary for a general partnership to be formed. The legal definition of a partnership is generally stated as "an association of two or more persons to carry on as co-owners a business for profit" (Revised Uniform Partnership Act § 101 [1994]). Although a partnership can be implied by law, if you are forming a partnership you should always have a partnership agreement so that you are not at the mercy of the laws which are implied without one. Most of the law of General Partnerships applies to Limited Partnerships.
In a General Partnership, each of the partners (there can be more than 2) shares in the profits and shares in the liability of the partnership, including losses, unless the partner is a limited partner. A partnership is considered an association of co-owners for tax purposes, and each co-owner is taxed on his or her proportional share of the partnership profits.
Like other businesses, a partnership needs to have a license to do business in towns in which it has offices and may use an assumed name, so that Blow LP or GP could operate as Blow Holes.
All partners must consent in sale of the assets of the partnership. A partner's interest in a partnership is considered personal property that may be assigned to other persons, but, if transferred, the transferee only receives the financial benefit and does not become a partner.
The death of a partner terminates the partnership, and the filing a dissolution of the partnership with the state also terminates the partnership.
Advantages of Partnership
Partnerships typically have less costs, paperwork and state registrations involved in both formation and upkeep. However, without written documentation, the partnership becomes subject to significant defaults state laws.
With regard to taxes, the partnership is not a separate taxable entity, but instead the profits pass through to the partners who pay for them as income tax.
Disadvantages of Partnerships
In a General Partnership, each partner is liable for the acts of the others and financial losses of the partnership, and there is no protection of personal property as there is with a corporation. Any partner without the other may bind the partnership. Money and property contributed to the partnership becomes owned by the partnership unless otherwise stated and the contributor is not entitled to its return unless stated in the partnership agreement.
Partnerships vary in legal requirements and liabilities by state, do not have the easy of transfer and investment that a corporation structure provides and therefore are regarded as less preferable to other business forms for investment.
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