What is a Partnership?
Partner up! No this is not a Sadie Hawkins Dance or the time to bust out some partner conditioning exercises in the gym. It’s time to invest in a business opportunity.
We’ve learned how to pick partners since grade school. Sometimes it was as easy as just locking eyes with person next to you. Well in the business world, a lot more factors go into choosing the right person. Once you found your business soul mate, brainstorm sessions start churning and new venture ideas become a reality.
An individual going into a business partnership will have expectations. Expectations as to how the company will operate, produce profits, and manage risks. The partnership may even have an expiration date.
So how do you know when a partnership is created? Maybe locking eyes is not enough but can it be as simple as a handshake? How the partnership comes in existence depends on the type of partnership that is created. For legal purposes, all partnerships are agency relationships but may come in three different forms: (1) General Partnerships (2) Limited Partnerships (3) Limited Liability Partnerships.
Generally, a partnership is formed when two or more persons intend to do business together as co-owners. State laws govern how partnerships are formed and conducted. Factors that can determine whether there is a partnership include an agreement to share profits, an agreement to share losses, a mutual right of control or management of the business, and a community of interests in the venture. Let’s take a look at the differences of each type of partnership.
The acronyms can really add up - General Partnerships (GP), Limited Partnerships (LP), Limited Liability Partnerships (LLP). The most effective type of partnership will depend on the relationship you have with your partner(s) and the future outlook of the company.
The advantages and disadvantages to choosing the right business entity depend on a number of different factors. If you would like to understand more about how your business entity choice implicates you personally or how you can benefit from a particular entity form, please reach out to Attorney Christina A. Simpson, Esq. here.
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