Partnership Types

A business partnership agreement takes place for the mutual benefit and welfare of two parties. Whenever you decide to be a part of a business partnership, then you are ready to play with your finances.

If your finances get into trouble because of some decisions taken by your partner, then you are also liable to answer. Otherwise, your personal assets will come to your rescue. 

Broadly, you will get to know about four partnership-types, which will reduce these risks. 

Types of Partnership

Let’s dive deep into the topic and explore the secrets of different types of partnership in business. Every coin has two faces. In the same way, every type of partnership has its own pros and cons. It depends solely on you how you view the aspects  of different types of partnerships.

Here, I will provide you with a detailed description of four different types of partnerships in business firms. 

General Partnership

1. This is the most basic type of partnership that is formed without a Business entity within the state. This can only be done by signing a business partnership agreement between the two parties.
2. Every party has separate powers to establish its ownership and profits. However, the partnership agreement also contains these details.
3. They have the right to distribute their business for loans and funds. If you are a part of the business partnership, then you are solely responsible for the debts and legal duty. The synonym for this type of partnership is mutual responsibility.
4. For example, if there are four partners in a general partnership applying for a loan, and one of them goes bankrupt, then all four people are responsible for paying the money back.

Limited Partnership

1. These types of partnerships have authorization from the states and are considered a formal relationship between two or more individuals. In this case, there is one active and other passive partner. The passive partners are known as the limited partners.
2. The limited partners are not responsible for any type of debts or legal obligations.
3. The limited partner invests their money in the firms in order to receive something in return without losing anything more than what they have invested.
4. If limited partners start working actively in the business, then they lose the title of limited partners and also lose the advantages of being a limited partner. 

Limited Liability Partnership(LLP)

1. It is just the same as that of a general partnership, the only difference is that one or another partner is not liable for each other’s action. However, all the partners can participate actively in the business.
2. The partners have to bear in case of a crisis in the business, but they are not responsible if the crisis is due to the mistakes and errors of other partners.
3. This type of partnership is only applicable for some specific occupations like doctors, accountants, and lawyers. 

Limited Liability Limited Partnership(LLLP)

1. This is the newest partnership that only operates in a few states. It is the twin sister of a limited liability partnership, in which there’s one general partner who works actively in the business. However, the difference between LLLP and LLP lies in the liability of the general partner.
2. All the states do not support the LLP partnership. That’s why LLLP is not considered as a good start for your business.
3. Some of the states which support this type of partnership are Alabama, Washington, Iowa, North Carolina, Texas, South Dakota, Georgia, and a few more. 

What is Business Partnership?

As the name suggests, a business partnership is maintained by multiple owners. If you wish to get into a business with someone without any paperwork, then you are in a business partnership agreement. It’s not necessary to register this partnership, and that’s why it’s not a legal business entity. 

Steps to Legally forming a Business Partnership Agreement

If you wish to get into a business partnership, then you should follow these steps accordingly. 

1. Step 1
   1. Choose the right partnership plan according to your needs. Look out for those partnerships which are permitted into your state. 
   2. Introspect about your business. Think, why do you wish to get into this partnership? What do you expect from this partnership? How would you handle so many tasks at once? Is there any family member who will guide you in the process?
   3. Consult a business specialist and select the perfect partnership type as per your situation. 
2. Step 2
   1. Create a draft of your business partnership proposal and give clear-cut instructions about all the necessary details of your business agreement. 
   2. All the small details of disputes, loans, credits, profits, losses, death should be kept in mind while preparing the draft. Every partner needs to sign the business partnership agreement and prepare a separate file for this important document. 
3. Step 3
   1. Give a proper name to your business. Consult with all the members and mutually decide about the significant details. 
4. Step 4
   1. At this point, you need to register your business. You need to make yourself clear about the type of partnership you are opting for and then apply for it. 
5. Step 5
   1. After choosing the type of partnership, last but not the least annual reports are a must in business. 

Long-Lasting Trusted Partnership

Being a part of the business is not an easy task. You may suffer profit or may suffer losses at times. But always stick to the principles of your partnership and never give up. The synonyms of business are a risk. The risk factor is always there in a business.

There’s no one in the world who could assure you that you will be successful in a particular business. It’s only your approach and right mindset which can make a difference. There are a lot of features of partnerships. Hope you will understand the types of partnership in a lucid way and pass with flying colours.