When you put up a business with other people, you can work together through a partnership or LLC (Limited Liability Company).
Kinds of Partnership
The two kinds of partnerships are limited partnership and general partnership.
The owners who run their business through general partnership share the same management responsibilities and equal profits and equal losses.
Meanwhile,
The limited partnership has one major partner that manages and finances the business, while other parties will provide the capital.
Limited Liability Company
This type of multiple-owner business has the good features of a partnership and a corporation.
First, it protects the members from personal liabilities. If the company can’t pay a creditor,
that creditor can only run after the assets of the LLC.
It means creditors can’t run after the personal belongings of any of the members, only the assets that the members have invested in the LLC Company.
There are four significant aspects in running your business through partnership or LLC, which are:
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Formation
The partnership can form formally or informally. Its formation can be done verbally or in writing,
but some state laws require written agreement to establish the rights and duties of each partner.
Meanwhile, LLC is a bit more formal than the partnership, but it is not as complex as forming a corporation.
It requires an operating agreement to establish the duties and rights of each member.
-
Management
The general partnership provides equal rights to all members.
The limited partnership has a significant member or general members that are responsible for running the business.
Meanwhile, LLC provides you with an option to share equal rights and duties or have it as a limited partnership does.
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Profit-Sharing
General partnership, limited partnership, and LLC are the same for-profit sharing and losses.
The profit each member gets depends on their capital investment.
-
Legal Liability
General partnership members have personal liability.
For a limited partnership, those not general partners will only be risking the money they have put up for the business.
Meanwhile, LLC members are not personally liable for the company’s debt or even legal liabilities,
unless they have done the violations personally.
Some businesses are best run through partnership, and there are other more appropriate for LLC.
To make sure you operate yours through the right system, consult and hire a lawyer when forming your business.
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