If you planned to have one or more partners in your business – partnership structure may preferably be the right choice for your venture entity. In this form of business. It is believed that there are two or more than individual owners of the company who operates and pool the capital to run their venture together. Every partner is legally the owner of the business equity as thereto the ratio of efforts settled in the partnership deep.
At the time of registration, a partnership contract deed is formatted framing the clauses who is gonna play which role and what extend of ownership ratio is settled between/among the partners. This way the company is going to protect itself in case of potential dispute in partners, or one decides to go its distinct way, which can hit back the company.
The partnership is there because of people who have the mutual interest and same vision come together to broader their interest and straightening themselves to achieve the project – as in the personality of partners can occur of individuals, businessmen, political parties or any two parties to seek to have much potential being together.
The partnership devises two solutions — General Partnership (GP) & Limited Partnership (LP).
General Partnership is a normal form of partnership in which the partnership run the company together and take the full responsibility of the venture activities and the company is completely incumbent on the partnership work, thereby company could not form a separate legal entity, consequently, there are the unlimited liabilities and obliged for company’s debt to pay off the liabilities of the company in case the liquidity could not meet the debts as well as there’s also no successive life of the partnership. This way the partner’s personal properties are always on the risk – can be sealed or acquired by the injured party in the situation of sue on the company.
Another concern about fundraising in GP form as no investor would want to be personally liable for the company loss or failure events – in order to gain the fund from investors you may consider its sibling entity known as Limited Partnership (LP).
In the case of LP, you’re allowed to add investors as a partner being limited liable for particular investors – such partner known as silent partners who only seek a return on the investment and do not want to be liable by not interfering in the managerial affairs of the business. Hence they don’t allow any power to vote or control over day to day management, although the profit and losses of the company are shared by all the partners including silent partners as per the capital share ratio contributed.
In the Limited Partnership the rest of silent partners there are general partners who control and manage the company, the same as general partnership partners. The silent partners can add up as many as 50 or 100 depends on your jurisdiction commercial laws, but sometimes it’s difficult even to find investors for your LP because of the downsides of LP from the perspectives of investors.
Limited Partnership can be much featured and convenient as compared to General Partnership for both types of partners – personal liabilities protection for limited partners, full control of the organization by general partners which is upside of General Partnership and downside for partners.
In partnership firms – they enjoy the taxation benefits as it does not taxed federal, despite the tax is passed through individual owner income and losses at the time of reporting their personal incomes.
A partnership is good from various points of view for examples – your business idea is out of your skills and experience, in such condition you can issue crazy incentives of being a partner to other skilled people who can accomplish the needs like of financial and instrumental resources, skills, knowledge and experience making it easy for newcomers to enter in the business and forms a relationship of partnership – together they are stronger.
