There are several partnership structures: General Partnership, Limited Partnership and Limited Liability Partnership.
Pros of General Partnerships
- Partnerships can be easily formed because, similar to sole proprietorships, these business entities are unincorporated
- Partnerships allow two or more people to share liability and provide capital
- Business income is reported on partners’ individual tax returns
Cons of General Partnerships
- The primary disadvantage of the sole proprietorship business structure is liability--the owner's personal assets are not protected because the company and the individual are treated as one entity
- Note, this can be overcome to some extent by using the limited partnership structure. BUT, there must always be a general partner who shoulders all the liability
- All partners are liable jointly and severally for all obligations of the partnership unless agreed by the person suing the partnership or the partner
The Limited Partnership business structure may provide limited liability for some partners. There must be at least one general partner that acts as the controlling partner and one limited partner whose liability is normally limited to the amount of control or participation of the limited partner. General partners of a Limited Partnership have unlimited personal liability for the partnership's debts and obligation. To form a Limited Partnership, the members must usually file a Certificate of Limited Partnership with the Registrar of Companies
Limited Liability Partnership
The LLP business structure is generally reserved for a group of accountants or lawyers.