What Is the Fundamental Difference Found in a Limited Partnership?
Numerous types of business associations have important legal distinctions. The two most important considerations for many businesses are the tax implications of a particular business structure and the liability faced by the owners of the business. Within the broader category of partnerships, limited partnerships, limited-liability partnerships and general partnerships are the three primary subcategories of business associations.
Other People Are Reading
-
Taxation
-
In a limited partnership, just as in other forms of partnerships, profits to the company are taxed only at the firm level and not at the individual level as they are in C corporations. For this reason, partnerships are often favored over corporations whenever the owners of a business have the opportunity to make such a distinction.
Liability
-
The other important consideration for business formation is liability. In a general partnership, all of the owners are partners and share joint and several liability, meaning that all partners are equally liable for the actions of the company and that any partner may be sued individually for those liabilities. Once one partner is sued, it is up to her to join her other general partners in the lawsuit.
-
General Partners in a Limited Partnership
-
An important distinction between limited partnerships and other forms of partnership is that a limited partnership has both general partners and limited partners, whereas a general partnership has only general partners and a limited liability partnership has only limited partners. The general partners in a limited partnership have joint and several liability just as all of the partners in a general partnership would.
Limited Partners in a Limited Partnership
-
Limited partners in a limited partnership have the same limited liability as all partners in a limited liability partnership. This means that they are not liable for the activities of the firm as a whole. Nevertheless, limited partners still have liability for their own activities while acting on behalf of the firm.
-
References
- Photo Credit Comstock Images/Comstock/Getty Images
