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Sep 08

Hughes Media Law Group

Types of Partnership Entities

Posted by Hughes Media Law Group

The popularity of the partnership has waned in recent years because of the adoption of LLC statutes across the US. Nonetheless, it is still a valid entity choice worth considering. The many different types of partnerships can be overwhelming at first. Here is a quick summary:

General Partnership (GP)

  • Oldest form of multiple party business entity.
  • Offers no liability protection for partners.
  • No need for registration with state to form.

Limited Partnership (LP)

  • A partnership with 1) one or more general partners; and 2) one or more limited partners.
  • General partners are liable for all debts and obligations of partnership.
  • Limited partners have no personal liability for obligations of partnership and have no control over daily business decisions and operations.
  • LPs are often investors in the business.
  • Must file with Sec. of State to form.

Limited Liability Partnership (LLP)

  • No general partner/limited partner distinction.
  • All partners are protected by limited liability for all entity debts and obligations.
  • Must file with Sec. of State to form.

Limited Liability Limited Partnership (LLLP)

  • Entity has both general partners and limited partners.
  • General partners now have limited liability as well.
  • Must file with Sec. of State to form.
  • Not all states have adopted LLLP statute provisions.

The main point to remember from all this is that a GP can be formed without any formal registration. All it takes to form a GP is for two or more people to get together with the goal of earnings a profit. Thus, individuals can be part of a GP and not even know it.

What are the consequences of this undocumented partnership? You will be liable for any debts and obligations incurred by your business partner(s)

These blog posts are made available by HMLG for educational purposes only and to give you a general understanding of the law. The information provided should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.