| There are a variety of ways to structure the | | | | So, is there any way to take advantage of the tax |
| formation of a business. Partnerships and limited liability | | | | benefits of a partnership while avoiding the potential |
| partnerships are two of the choices. | | | | liability problems? Many people think a limited liability |
| If you are currently running a business, you might be in | | | | partnership is the answer. |
| for a surprise. If the business has two or more owners | | | | A limited liability partnership is just like a general |
| and no specific business entity has been formed, you | | | | partnership with one big exception. The limited partners |
| are in a partnership! Why? Under long standing law, | | | | are shielded from personal liability. The "LLP" takes the |
| any business with two or more owners is | | | | following form. There is one general partner that |
| automatically considered a partnership unless | | | | actually runs the business on a day to day basis. |
| affirmative steps are taken to form the business as | | | | There are then multiple limited partners that make |
| something else. | | | | capital contributions to the partnership in the form of |
| A partnership is a form of business that has great | | | | cash, products and so on. If the LLP is sued, the |
| benefits and horrendous negatives. Personally, I believe | | | | general partner has no protection. The limited partners, |
| it should be used sparingly as a form of business. | | | | however, can only lose their investment in the business. |
| Why? Well, a partnership provides no protection to its | | | | So, why doesn't everyone just form a limited liability |
| owners. If the partnership gets sued, all the partners | | | | partnership? Well, the limited partnership position is |
| are liable for the debt. This liability is total. If you only | | | | really restricted. As a limited partner, you can not be |
| own 10 percent of the partnership, you can still be | | | | involved in the running of the business. You are |
| required to pay 100 percent of the debt if you are the | | | | essentially limited to contributing capital to get the |
| one with money. For this sole reason, I believe | | | | business up and running. If you don't like the way things |
| partnerships should be avoided like the plague as a | | | | are being done, there isn't a lot you can do. If a limited |
| business entity choice. | | | | partner becomes active in the running of the business, |
| So, why would anyone form a business as a | | | | he or she loses all protection from liability. |
| partnership? In a word - taxes. Partnership entities do | | | | All and all, partnerships should be used sparingly. They |
| not pay taxes. Instead, the finances of the partnership | | | | can be excellent choices for very particular business |
| pass down to the partners in accordance with their | | | | situations. If you are considering this form of business, |
| ownership percentages. It makes life easy from a tax | | | | make sure to speak with an experienced business |
| perspective and avoids a lot of the complexities of | | | | attorney so you know exactly what you are getting |
| business taxation. | | | | into. |