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Which is Better Partnership or LLC?

HomeReal EstateWhich is Better Partnership or LLC?

When you put up a business with other people, you can work together through 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, as well as equal profits and equal losses.


limited partnership has one major partner that manages and finances the business, while there are other parties who will just provide the capital.

Limited Liability Company

This type of multiple owner business has the good features of a partnership and a corporation.

It protects the members from personal liabilities. This means, if the company can’t pay a creditor,

that creditor can only run after the assets of the LLC.

This 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 major aspects in running your business through partnership or LLC, which are:

  • Formation

Partnership can be formed in a formal or informal way. Its formation can be done verbally or in writing,

but there are some state laws that require written agreement to establish the rights and duties of each partner.

Meanwhile, LLC is a bit more formal than 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

General partnership provides equal rights to all members.

Limited partnership has a major 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 like limited partnership does.

  • Profit Sharing

General partnership, limited partnership and LLC are basically the same when it comes to profit sharing and loses.

The profit each member gets depend on his or her capital investment.

  • Legal Liability

General partnership members have personal liability.

For limited partnership, those that are 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.

There are businesses that 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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