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Continuing our series on the types of business structures available to small businesses, today we'll look at the partnership. The general partnership is one of the oldest forms of joint business endeavor. Today, it has spawned several children, including limited partnerships, limited liability partnerships (LLPs), and even limited liability limited partnerships (LLLPs).
Some benefits of doing business as a partnership include:
Some disadvantages include:
To get away from some of these disadvantages, some states allow limited partnerships, in which general partners run the business and have full personal liability but limited partners are more like investors and have no liability beyond their investment.
Many states also allow limited liability partnerships (LLPs). Some states, such as California, restrict the use of the LLP format to professional fields such as law, accountancy and architecture. Partners in LLPs have joint authority, but limited liability for the claimes against the partnership. Some states, however, allow LLPs to limit partner liability only in claims of negligence against the partnership. In these states, partners in LLPs can be liable for contractual debts or torts beyond negligence committed by the partnership. LLPs must also register with the state and are subject to increased formality and often insurance requirements.
To further complicate the menu, there is the LLLP, the limited liability limited partnership. This is like an LLP (limited liability for all partners), except it has general partners running the business and limited partners acting more as investors.