When starting a small business, it is vital to understand what structure will work best for you and the business. In many cases, partnerships seem to be the most beneficial and the most lucrative for a small business. In these cases, it is important to understand what a partnership looks like and the different types available. This will ensure a small business owner creates a business structure that benefits them and their business.
How does a partnership compare to other business structures? Next to sole proprietorship, developing a general partnership is the easiest type of structure to form. Partnerships, unlike corporations or limited liability companies, do not have formal requirements or paperwork that need to be filed. Only two things need to exist. This includes a business and the sharing of profits. While partnerships are easy to form, they could present difficulties when it comes to managing them and even dissolving them.
There are three different types of partnerships. This includes a general partnership, a limited partnership and a joint venture. A general partnership is where partners equally divide management, responsibilities and profits. A joint venture operates like a general partnership but is formed for a limited purpose or a single project. If it is repeated, however, it will be labeled as a general partnership.
Finally, in a limited partnership, there can be managing partners and limited liability partners. For managing partners, there is the assumption f liability for the success or failure of the business. For limited partners, he or she can only lose money if it is invested. This type of partnership can be more complex, though, requiring more paperwork.
Beginning a business is a huge deal. Thus, those involved in the process should understand how best to make it successful. By taking the time to explore formatting and planning options, small business owners can feel confident that they have taken the proper steps to not only protect the business but him or herself as well.
