A partnership (also referred to as a general partnership) is a business arrangement where two or more people (who are not husband and wife) are owners of a business. Unlike a corporation, you do not need to file any documents with the state to make your business a partnership. A partnership is created by default, unless the business is specifically formed as some other type of business entity, such as a corporation, a limited liability company, or a limited partnership.
A general partnership is one in which all of the partners have the ability to actively manage or control the business. This means that every owner has authority to make decisions about how the business is run as well as the authority to make legally binding decisions. Unless the partners have a partnership agreement, each partner will have equal authority.
Partners in a general partnership don't have any limit on their personal responsibility for the debts of the business. This means that the partner could lose more than just his investment in the business – personal assets would have to be used to pay business debts if necessary. Each partner in a general partnership is also "jointly and severably" liable for debts of the business. Joint and severable liability means is that each partner is equally liable for the debts of the business, but each is also totally liable. So if a creditor can't get what he is owed by one or more of the partners, he can collect it from another partner, even if that partner has already paid his share of the total debt. If someone sues your partnership and obtains a large judgment, and your partner doesn't have the money to pay his share of it, you will have to pay the entire amount.
A limited partnership is different from a general partnership in that it requires a partnership agreement. Some information about the business and the partners must be filed with the appropriate state agency (usually the secretary of state).
Additionally, a limited partnership has both limited and general partners. A limited partner is one who does not have total responsibility for the debts of the partnership. The most a limited partner can lose is his investment in the business. The trade off for this limited liability is a lack of management control: A limited partner does not have the authority to run the business. He is really more or less an investor in the business.
A limited partnership must have at least one general partner. The general partner or partners are responsible for running the business. They have control over the day-to-day management of the business and have the authority to make legally binding business decisions. The partnership agreement will specify exactly which partner or partners have certain responsibilities and which have certain authority. General partners are also subject to unlimited personal liability for the debts of the business. The general partners of a limited partnership are also jointly and severally liable for the debts of the business, just like partners in a general partnership.
Source : http://www.alllaw.com/articles/business_and_corporate/article12.asp
Differences between an LLP and a Limited Partnership (LP)
LLPs are distinct from limited partnerships in that limited liability is granted to all partners, not to a subset of non-managing "limited partners." As a result, LLPs are more suited for businesses where all investors wish to take an active role in management.
Source : http://www.legalzoom.com/llp-guide/llp-limited-partnership-comparison.html
About
Hello and Namastey,
Welcome to my blog.
I am an Accounting technician from India. After marrying Raj I came to USA and pursuing CPA here. My experiences were and will be written in this blog and the collected resources are kept here for reference along with my study notes and other stuff related to CPA Students.
Hope my Journey and blogging assist you in your preparation for a bright CPA future. And hope you find something here that will help you. Send me an email if it does and I am the happiest soul you know.
Please know that I read and appreciate every email and comment, and do my best to answer any questions within that section of each post.
My best wishes.
Mrs.Raj
Comments, feedback, suggestions, ideas and criticism can be submitted here. Thank you!
Welcome to my blog.
I am an Accounting technician from India. After marrying Raj I came to USA and pursuing CPA here. My experiences were and will be written in this blog and the collected resources are kept here for reference along with my study notes and other stuff related to CPA Students.
Hope my Journey and blogging assist you in your preparation for a bright CPA future. And hope you find something here that will help you. Send me an email if it does and I am the happiest soul you know.
Please know that I read and appreciate every email and comment, and do my best to answer any questions within that section of each post.
My best wishes.
Mrs.Raj
Comments, feedback, suggestions, ideas and criticism can be submitted here. Thank you!
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Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). It is a partnership in which only one partner is required to be a general partner.[1]
The GPs are, in all major respects, in the same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership.
As in a general partnership, the GPs have actual authority as agents of the firm to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership's business. As with a general partnership, "An act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership's activities or activities of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners." (United States Uniform Limited Partnership Act § 402(b).)
Like shareholders in a corporation, LPs have limited liability, meaning they are only liable on debts incurred by the firm to the extent of their registered investment and have no management authority. The GPs pay the LPs a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement.
Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.
Souce : Wikepedia
Links: http://www.quickmba.com/law/partnership/limited/
The GPs are, in all major respects, in the same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liability for the debts of the partnership.
As in a general partnership, the GPs have actual authority as agents of the firm to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership's business. As with a general partnership, "An act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership's activities or activities of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners." (United States Uniform Limited Partnership Act § 402(b).)
Like shareholders in a corporation, LPs have limited liability, meaning they are only liable on debts incurred by the firm to the extent of their registered investment and have no management authority. The GPs pay the LPs a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement.
Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.
Souce : Wikepedia
Links: http://www.quickmba.com/law/partnership/limited/
Limited Liability Partnership
Small business owners sometimes choose the organizational form of a limited liability partnership (LLP) for their business. An LLP is a type of general partnership that provides its general partners with limited liability for certain obligations of the partnership. It has the benefits of a partnership and limitations on liabilities. For example, partners in LLPs are not liable for the debts caused by the negligence of other partners.
What is an LLP?
An LLP is a partnership that limits the exposure of general partners to certain kinds of partnership liabilities. The characteristic that the LLP shares with the corporation is limited liability. Under the typical LLP law, a general partner in an LLP:
Is not liable for the debts and obligations of the LLP arising from errors, negligence, wrongful acts, or misconduct committed in the course of the partnership's business by another partner or by an employee, agent, or representative of the LLP
Is liable for the general obligations of the partnership
Is liable for obligations arising from his or her own misconduct, and for obligations arising from the misconduct of a person over which he or she has direct supervision and control
May be liable when the partner had notice or knowledge of misconduct by another partner or representative
Origin of LLPs
Under traditional partnership law, each partner has the power to bind the partnership. The partnership is liable for the wrongful acts of any partner acting in the ordinary course of the partnership's business. In addition, partners in a general partnership are personally liable for partnership obligations if the assets of the partnership are insufficient to satisfy them. Therefore, partners in a general partnership are subject to personal liability for the negligence of other partners. These rules developed when partnerships were small and partners were aware of each other's activities.
In the 1990s, several trends combined to increase the risks to which partners of a general partnership were exposed under traditional partnership liability rules, especially in law and accounting firms. Among these trends were:
An increase in the number of partners in general partnerships
An increase in the complexity of practice areas at larger general partnerships
An increasing number of malpractice suits filed against larger general partnerships
Escalating malpractice insurance costs
The proliferation of claims with very high dollar values, such as claims brought by government regulators against law and accounting firms in connection with the savings and loan crisis
The limited liability partnership was conceived in the 1990s to address the needs of partners in light of these developments. The first limited liability partnership law was enacted in Texas in 1991. Almost all states currently have LLP laws.
LLP laws generally permit partners in professional general partnerships to shield themselves from liability for contractual obligations of the partnership, but hold them personally liable for their own negligent or wrongful acts and for the negligent or wrongful acts of individuals acting under their supervision or control. Partners are not liable for debts and obligations resulting from the negligence of other partners. Generally, rules applicable to general partnerships, including those that govern contributions, management, operation and dissolution, apply to LLPs.
State laws vary on the kinds of protections that they provide to partners in an LLP. Although the first Texas law shielded partners from personal liability only for partnership obligations arising from the malpractice of other partners, some more recent laws protect partners in LLPs from all partnership debts.
Source : Lawyers.com
Links:
http://www.sos.state.ia.us/business/limliabpart.html
http://cpajournal.blogspot.com/2009/02/uniform-limited-partnership-act-2001.html
What is an LLP?
An LLP is a partnership that limits the exposure of general partners to certain kinds of partnership liabilities. The characteristic that the LLP shares with the corporation is limited liability. Under the typical LLP law, a general partner in an LLP:
Is not liable for the debts and obligations of the LLP arising from errors, negligence, wrongful acts, or misconduct committed in the course of the partnership's business by another partner or by an employee, agent, or representative of the LLP
Is liable for the general obligations of the partnership
Is liable for obligations arising from his or her own misconduct, and for obligations arising from the misconduct of a person over which he or she has direct supervision and control
May be liable when the partner had notice or knowledge of misconduct by another partner or representative
Origin of LLPs
Under traditional partnership law, each partner has the power to bind the partnership. The partnership is liable for the wrongful acts of any partner acting in the ordinary course of the partnership's business. In addition, partners in a general partnership are personally liable for partnership obligations if the assets of the partnership are insufficient to satisfy them. Therefore, partners in a general partnership are subject to personal liability for the negligence of other partners. These rules developed when partnerships were small and partners were aware of each other's activities.
In the 1990s, several trends combined to increase the risks to which partners of a general partnership were exposed under traditional partnership liability rules, especially in law and accounting firms. Among these trends were:
An increase in the number of partners in general partnerships
An increase in the complexity of practice areas at larger general partnerships
An increasing number of malpractice suits filed against larger general partnerships
Escalating malpractice insurance costs
The proliferation of claims with very high dollar values, such as claims brought by government regulators against law and accounting firms in connection with the savings and loan crisis
The limited liability partnership was conceived in the 1990s to address the needs of partners in light of these developments. The first limited liability partnership law was enacted in Texas in 1991. Almost all states currently have LLP laws.
LLP laws generally permit partners in professional general partnerships to shield themselves from liability for contractual obligations of the partnership, but hold them personally liable for their own negligent or wrongful acts and for the negligent or wrongful acts of individuals acting under their supervision or control. Partners are not liable for debts and obligations resulting from the negligence of other partners. Generally, rules applicable to general partnerships, including those that govern contributions, management, operation and dissolution, apply to LLPs.
State laws vary on the kinds of protections that they provide to partners in an LLP. Although the first Texas law shielded partners from personal liability only for partnership obligations arising from the malpractice of other partners, some more recent laws protect partners in LLPs from all partnership debts.
Source : Lawyers.com
Links:
http://www.lectlaw.com/files/buo04.htm
http://www.sos.state.ia.us/business/limliabpart.html
http://cpajournal.blogspot.com/2009/02/uniform-limited-partnership-act-2001.html
General partnership
A general partnership is an association of two or more persons to carry on a business as co-owners for profit. This form of business organization is ordinarily created by formal agreement, but a partnership may simply be created by oral agreements or may even be implied by the conduct and acts of the parties. A general partnership, like the sole proprietorship, is a business form with unlimited liability for the partners. This means that each partner's assets can be reached without limitation to satisfy partnership obligations incurred by the other partners. Unlike a sole proprietorship, a partnership must file an information return annually with the IRS.
Links:
http://cpajournal.blogspot.com/2009/02/uniform-partnership-act-1997_05.html
Links:
http://www.quickmba.com/law/partnership/general/
http://cpajournal.blogspot.com/2009/02/uniform-partnership-act-1997_05.html
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