Overview of General Partnerships
A general partnership is a business with at least two partners, who run it together under a common name. The partners are personally liable. A general partnership is usually formed through an agreement outlining roles, distribution of profits/losses, and dissolution.
Characteristics of General Partnerships
Common examples include small businesses like retail stores, restaurants, and law firms. In this type, partners are equally responsible for success or failure. An example is two entrepreneurs combining skills and resources in a joint construction venture.
- Each partner manages the business and has equal rights in decisions.
- Partners share equally in both responsibility and liability.
- An agreement may regulate the relationship between partners and the business’s dealings with the outside world.
- General partnerships do not provide limited liability protection.
Compensation and Decision Power
- General partners can get compensated for their services.
- Compensation is through "partnership distributions," which is a share in the partnership profits, not a "salary."
Types of Partnerships
What are the 3 examples of partnership?
- General partnership (GP): Partners share equally in both responsibility and liability.
- Limited liability partnership (LLP)
- Limited partnership (LP)
Conclusion
Partnerships can offer significant advantages for businesses, such as shared resources and access to new markets. They are an essential part of the business landscape, offering many examples of successful collaborative efforts.