Owning your own company requires having knowledge in many different areas. Depending on the type of company you own, you need to have a thorough knowledge of what makes it successful.
You need to know how to market yourself. You must keep detailed records of income, expenses, and client lists. Learn how to manage day-to-day activities.
More importantly, you’ll need to know how to legally structure your business to make it profitable for all partners.
How to Determine if a Partnership is Right for You
Facts to consider when deciding whether this is an appropriate structure:
- Can the firm be easily and properly managed by just a few people?
- Will adding more partners expand an existing sole proprietorship?
If either of these factors is present, a partnership entity may make sense. There are issues you need to evaluate to determine if it is the best structure.
A partnership is often less complicated to maintain compared to a corporation. Yet, there are other factors to consider before deciding which structure may be best.
What is a Partnership, and are there Various Types?
A partnership is a business entity or structure involving two or more owners.
Generally, partnerships form when a firm is growing. This does not require the complexity and flexibilities provided by a corporation.
There are four basic types available to partners operating as a joint venture.
Each type allows for different levels of personal and financial responsibilities for the partners involved.
1. General Partnership
2. Limited Partnership
3. Limited Liability Partnership
4. Limited Liability Limited Partnership
A Limited Liability Limited Partnership (LLLP) is a combination of a LP and a LLP. One or more owners may have more day-to-day responsibility and/or financial investment than others. A negligent act by one partner should not result in liability to other partners.
Because of the complex nature of this type of structure, an a agreement that is drafted by an experienced business lawyer is strongly recommended.
Management Structure Requirements
If a business is growing at a rapid pace, a change from a partnership to a corporation can help. This will help owners better manage their workload. The help of qualified board members can aid in this effort as well.
What Else Should I Know About Partnerships?
There are other ways in which partnerships differ from incorporated businesses.
As you decide which type of legal entity is best for you, you may want to consider the following facts:
1. Unlike corporations or LLCs, partnerships are not considered separate legal entities. The partners are fully responsible for any financial or legal liabilities.
2. All partners are equally responsible for debts incurred by the business. LPs can let specified partners give up management duties for the sake of the business.
3. They must follow their specific state’s registration requirements. Contact our office for more information on Arizona’s requirements.
4. Partners create a name to file their business under.
Partnerships are easier to create and manage than corporations or even LLCs. There are still important decisions that partners must make before outlining their agreement.