So you decided to start a business but you have no idea about the types of business partnerships. It is important to form the right types of business partnerships before starting any business because a wrong type of business partnership can break your business dreams halfway. Although there are various types of business partnerships, a generic approach for the sake of partnership is not appreciated in making the most important decision in life.
Read on to learn more about the various types of business partnerships and how to use them in your favour:
Type 1: General Partnership
General partnership is one of the most popular types of business partnerships. General partnership involves two or more business owners that are united for the cause of doing business.
* General partnership is one of the most popular types of business partnerships because it gives equal rights to each partner.
* The typical business establishment is often the collective efforts of friends. As long as you are not forming a partnership with someone outside your personal circle, you are likely to choose this partnership option.
* In general partnership, each partner is assumed full responsibly on everything related to the business, including debt and obligations.
For most generic business models where each partner shares the same qualities, general partnership is the best choice.
Type 2: Limited Partnerships
Limited partnerships are one of the best types of business partnerships because it helps you to restrict each partner’s personal liability on the business investment. The key in entering limited partnerships is talking the terms and conditions upfront and getting your agreement done before the company starts functioning.
For example, sometimes your partner is just an investor but it is your idea to run the business and your partner is of limited help in helping you with important business decisions. He can however help you to manage your fund flow. In this case you need limited partnership.
Type 3: LLP
LLP or limited liability partnership is called as one of the best types of business partnership by some. This is because it has every advantage of the general partnership but also ensures personal liability protection to the company members. You do not have to pay any compensation once the company falls in a loss because you will keep a risk amount upfront before you start the partnership.
Once your assets and revenues are disclosed, you are not liable to pay for any loss or damage from your pocket but if the LLP has funds remaining, authorities will use these funds to compensate as much as loss they can.
These are the 3 types of business partnerships that you need to know. General partnership is great for those that start a company with their partner but this is not one of the best types of business partnerships for anyone else, even a close friend. However, if you and your partner assume to take up the same responsibilities, it may work for you. The better choice is to enter a liability or limited liability partnership with partners.