We have discussed in detail about the forms of business ownership and our today’s topic circles around 3 different types of business partnerships. We will see how many types of partnerships are there and what are they. Click here to see all the types of business ownership.
Before getting towards the forms of business partnerships. Let’s have a quick knowledge of partnership form of business. In case, if you know about what is partnership in business, you are good to skip the next paragraph and move to the types portion directly.
Partners as we know means something that is shared between two or more persons. Partnership is another commonly followed type of business ownership and there are some important factors everyone needs to understand.
Partnership means two or more persons owns a business. Their responsibilities depends on the agreements they have agreed upon. Most commonly followed partnership is that in which partners have equal division of responsibilities, tasks, working hours, investment and profit and loss. Partnership can be uneven as well. For e.g. Silent partners only invest and earn without taking part in any of the business activity. Their profit percentage is comparatively low than the business in which they are active.
Summary is that business owners sign an agreement before setting up the business and the share of responsibilities, time, work, profit and loss is decided. The decision making is done when all the partners are agreed. The 3 different types of business partnerships are explained in next section.
3 Types of Partnerships
The three most known forms of business partnerships are general partnership, limited partnership and limited liability partnership. Other than these 3, joint ventures can also work as a partner and we will discuss it briefly at the end.
General partnership has general partners and each of these general partners sign an agreement. This agreement is the base of how much input these partners will give to the business and get benefited from it.
Responsibilities are divided between the general partners as they are all active. Each of the general partner is bound to follow the set rules and principles and fulfil their duties. Rules or principles are documented properly and signed by all the general partners. General partnership is good in context of taxation as partners are not taxed on their business but on individual basis which means at quite lower rate.
Limited partnership is also a type of partnership. But due to its following many sites and books state it as one of the type of business ownership as well. Limited partnership refers to the partners that are silent. See the example given in the previous section “Partnership”.
Limited partnership involves two types of partners. The general partner that runs business and is involved in all the activities. Second, the limited partner (investors) who aren’t part of any business activity but just invest and take profit as decided. Keep in mind that not all partners can be limited and at least one should be the general partner.
The overall responsibility of handling everyday business activities lies with the general partner. Whereas, the investors are only responsible for raising the capital and making the business financially stable. Both types of partners in limited partnership needs to look and choose their partners carefully.
Limited Liability Partnership
The tax advantage in limited liability partnership is the same as we get in general partnership. Limited liability partnership is more close to Limited Liability Company (LLC)(types of business ownership ka link dedena or ye wali bracket erase krdena sirf btanay k liye hai) than above two types mentioned. This type of partnership is defined as the mixture of both Partnership and Corporation form of business.
In Limited liability partnership, partners have limited liability and are not responsible for the errors made by others partners or employees. The data required about the limited liability partnership vary from state to state. Some states only requires partnership’s name, business name and principle while some requires names of each partner, identification number, insurance assured by the partners and written prove of limited liability status.
As we have mentioned earlier that joint venture is also a type of partnership but only according to few sources. Joint ventures in form of partnership means that a partnership between two business that are running for specific purpose. See our earning section for detailed article about Joint Ventures.
We hope you like our sharing about 3 different types of partnerships. Please comment below and tell us about type of partnership you are following or think is best suitable for you. Ask your fellow members below which form of business partnership is best for your business.