14 pros and cons of limited partnership is our core topic of discussion today. Limited partnership is one of the type of business ownership and it will be better if you go through these types first.
Every strategy or plan in business have some pros and cons as well. We will look into the pros and cons of limited partnership but before that let’s have a quick look over limited partnership. If you know about it already, you are good to skip it and move towards advantages and disadvantages of limited partnership directly.
Limited partnership is also a type of partnership but it’s so much followed worldwide. Many sites and books state it as one of the type of business ownership due to this. Limited partnership refers to the partners that are silent.
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.
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.
Pros and Cons of Limited partnership
Pros and Cons of limited partnership are as follows:
- Limited partners are not personally liable for any act as general partners are
- Capital amount is large enough as every partner contribute to it
- Limited partners can leave or can be replaced at any time without effecting business in any way
- Comparing with the corporation, it requires very less paper work so no need to worry about that
- Limited partnership is considered as one of the best opportunity for general partners as limited partner’s role is like an investor
- Limited partnership allows flexibility in their structure as needed
- Business can grow even in worst case as structure is flexible and partners can go for other great ideas that can ultimately result in growth
- Limited partners don’t need to worry about business activities as it all depends upon general partners
- General partners needs to be aware of business facing any debts as they have to pay from their personal balance
- It’s not compulsory that only one general partner have to pay the debts if it’s due to him. If one general partner is the cause of $1000 debt suppose, this debt will be divided on total number of general partners
- Registration of limited partnership business is required with a business registration office because limited partners requires to register them in state records
- Limited partners have to pay taxes as a whole on the income they receive on their investment
- For general partners, limited partnership is like sole proprietorship as they have to take all the responsibilities of debts, tax, income, investment and capital etc.
- Limited partners have no doubt maximum share in this business but still they cannot make decisions
These were the important 14 pros and cons of limited partnership. Please comment us about how much you like this article. See our Earning section for more business and entrepreneurial tips and ideas. Share your business experience below with your fellows.