How to Understand the Advantages of a Limited Partnership
A limited partnership is a business entity often formed of one managing general partner and a group of investors, or limited partners. Ease of setup makes this an attractive option for family businesses, small or home-based businesses, husband-and-wife teams or entrepreneurs in need of investment money. A limited partnership limits the liability of limited partners to the amount of capital they've invested, while protecting the general and liable partner's interest by giving them sole charge of business operations at all levels. Read on to learn more.
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Instructions
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Invest in a limited partnership if you wish to participate in a business entity without risking the unlimited liability of a general partnership. Keep in mind that limited partners have no voting rights.
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Establish a limited partnership and name yourself its sole general partner to raise money without losing control. In this way, you will split profits and financial burdens with your limited partners but retain control over business operations. This is a major advantage for many entrepreneurs.
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Forge a limited partnership rather than a corporation or LLC to enjoy minimal regulation and avoid gubernatorial interference.
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Save on costly start-up fees. Purchase a basic partnership agreement online from one of the numerous reputable business service providers for a minimal cost.
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Forget about hiring a business accountant or paying for additional tax returns, since limited partners enjoy pass-through tax benefits. As such, the entity pays no tax other than that levied on profits divided among its partners and claimed on their personal returns.
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Sign on to a limited partnership rather than a general one to limit liability to the capital you have invested.
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Name your limited partnership after its owning partners to avoid fictitious name business statement registration, advertisement and permitting.
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Tips & Warnings
Family limited partnerships provide advantages for parents who want to seamlessly transfer property and funds to their children postmortem without losing control while living.
The general partner does not enjoy limited liability within the context of limited partnerships. Rather, all personal assets are tied to the company's legal actions and debts as in a general partnership. Limited partners, though, have no say over business operations.
