Bus Law

1. Describe the 3 types of partnerships

When two or more persons decide to bring together their resources and carry on business together they form a partnership (Duplessis 325). It means they share in the profits and losses of the business, and each person contributes something to the business such as ideas, money, or property. The partnership can be described as a ‘’marriage without love’’ because each partner has to share a work and be honest like in a real marriage. There are three types of partnership: general partnership, limited partnership, or limited liability partnership (LLP).

General partnership

A general partnership is a partnership with only general partners. Each general partner takes part in the management of the business, and also takes responsibility for the liabilities of the business. If one partner is sued, all partners are held liable. This is the major disadvantage of this type of partnership, called ‘’unlimited liability’’ because each individual partner assumes full responsibility for all of the business's debts and obligations. Although such personal liability is scary, it comes with a tax advantage: partnership profits are not taxed to the business, but pass through to the partners, who include the gains on their individual tax returns at a lower rate.

Limited partnership

A limited partnership includes both general partners and limited partners; at least one partner has unlimited liability while others have limited liability (Duplessis 335). A limited partner does not participate in the day-to-day management of the partnership. It is possible that limited partners can be just investors who do not wish to participate in the partnership other than to provide an investment and to receive a share of the profits. A limited partner liability could be restricted to the amount of his or her business investment. The general partner has the right to control the business, while the limited partners do not participate in management decisions,...