What is The General Partnership?
A General Partnership is a business arrangement in which two or more individuals agree to share in all assets, profits, and financial & legal liabilities of a jointly owned business.
What kind of protection does it have?
In General Partnership, partners also agree to unlimited liability. This means that liabilities have no limits and can be paid through the seizure of any of the partners assets. Furthermore, any partner can be sued for the business debts.
Ex: Juan and Pepe decide to start selling empanadas, they decide that they want to work together and then create a general partnership where both are equally responsible for anything that happens in the business.
PROS CONS
| Less PaperworkLess feesEasy to createFlexible | Easy to DissolveWeak ProtectionLack of structureUnlimited Liability |
What is Limited Partnership?
A Limited Partnership is a partnership between two or more partners.
The general partner runs the business while limited partners DO NOT partake in managing the business.
What kind of protection does it have?
In this kind of partnership, the general partner has unlimited liability for the debts of the business. Meanwhile, any of the limited partners have limited liability up to the amount of their investment.
Ex: Antonio, Daniel and Jose own a bakery. Jose is the general partner, meaning he runs the bakery and has unlimited liability for the debts of the business. However, Antonio and Daniel are simply investors on the bakery and are only liable for the amount of their investment.
PROS CONS
| Usually, more CapitalLimited partners have limited liability up to the amount of their investment. | General Partner has unlimited liability for the debts of the business.Limited Partners have no say in decision making. |
What is Limited Liability Partnership?
A Limited Liability Partnership is a legal entity that allows two or more partners to benefit from economics scale by working together.
What kind of protection does it have?
In this kind of partnership, its structure allows partners to have limited liability up to the amount invested in the business.
Ex: A group of five lawyers become partners to lower the cost of business while increasing the capacity for growth. Differing from an LLC an LLP distributes managements duties equally and every partner is responsible for their own mistakes.
PROS CONS
| Not subject to direct taxationPartners are liable for their own mistakes.Less formal requirements & paperwork. | Business agreements without other partner’s consent.Any capital or property contributed to the LLP is owned by the partnership rather than individual contribution. |
What is a Limited Liability Company?
A Limited Liability Company is an entity which protects its owners from personal responsibility for its debts or liabilities.
What kind of protection does it have?
An LLC protect its owners personally from any liability created by the business if the business assets are sufficient. If it’s not creditors can go after personal assets of the owner.
Ex: Pepe starts a travel agency, He wants to be personally protected if it goes well or not for the business .To make the travel agency an entity he needs to make it an LLC.
PROS CONS
| Flexibility to run business as owner may wishReceives all profits.Limits the liability of the owner(s) by the actions of the company. | Higher cost to form than sole-proprietor or general partnershipFeesCreditors can go after personal property if business assets are not sufficient. |
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