Description of Business Entities

| A general partnership is comprised of a group of two or more individuals who enter into an agreement to start a business. The partners and the business are legally the same. The partners enter into an agreement called the articles of partnership and are typically equally active in the business and the business’s management, unless otherwise stated in the partnership agreement. All profits and losses are shared by the partners in a joint business venture.

Many believe that liability is a biggest issue in a general partnership than in a sole proprietorship. The owners of the company are still fully liable for any debts the company may accrue as well as the liability for any lawsuits that may be brought against the company. However, the bigger issue in a partnership is that now each partner can be liable for the other partner’s actions. If one partner is sued for malpractice, the other partner may suffer because of it.

Is a limited partnership treated as a separate entity for all purposes? If not, give an example of an instance in which a limited partnership is treated as an aggregate of its partners.

Liability All liabilities are the responsibility of each partner. In the event of litigation, any creditors can go after the personal assets of each partner to recover any debt owed. But since liability is spread out between the owners, one may feel less risk is being taken. 2. Income Taxes General partnership may also benefit from pass-through taxation, meaning the partners are taxed like sole proprietors. Business income is reported on the personal tax filing while business losses can be deducted to reduce personal tax liability. The partnership itself is not subject to federal income tax. However the partnership needs to file an information return utilizing the IRS Form 1065. 3. Longevity or continuity of the organization Once the partnership agreement is fulfilled, the general partnership may dissolve. A buy/sell agreement may be included in the articles of the partnership to allow the

This protects the limited partners from the full liability that is shared by the general partners.   Income Taxes – The limited partner’s profits are considered personal income and taxed as such. All profits from the limited partnership are considered personal income and taxed at their personal tax rates.  Longevity / Continuity – The continuity of the business is not affected by the death or disassociation of a limited partner.  An advantage for a limited partner is that the limited partner’s investment takes priority in the general partnership dissolves due to a death or disassociation of one of the general partners.

• Control: A sole proprietor has total control of the company and they make all the good decisions and they must deal with decisions that did not turn out the way they intend. The other notable factor in being a sole proprietor of a business is what would happen to the business if the owner became ill or died; typically the business would stop operations based on the structure and debts would need to be resolved as well as customer commitments would need resolving based on the type of business.

Limited liability partnership (LLP): In a LLP no general partners exist, only limited partners exist to create the business as a limited liability under this form of partnership. LLP’s are typically used for any professional type of business where all partners/owners (a minimum of two are required), have a voice in the taxation structure of the business.

The words “limited” and “partnership” appear in both the limited partnership and the limited liability partnership. Yet these two forms of business organizations are distinctly different. Moreover, both of these forms of business organization are distinctly different. Moreover, both of these forms are also distinctly different from the general partnership. The first URL given below will take you to an article on the web site of ALLLaw.com titled “The Difference Between a Partnership and a Limited Partnership.” Read through the article and then answer the following questions:

Limited partnership: Owners are distinguished as either general or limited partners. Limited partners are only liable about their contribution to the partnership involving funds, equipment and other property.

Partnerships come in two categories, general and limited. With a general partnership, associates succeed the company and undertake accountability for the partnership's debts and other responsibilities. In a limited partnership, partners serve as only investors. The partners have no power over the company and they are not focused with the similar liabilities as general partners have. A general partnership would be easier to practice if two or more partners who strive to be vigorously convoluted in the company. One of the major advantages of a partnership is the tax treatment it entails. A partnership does not pay tax on its earnings but passes through any profits or losses to the individual partners. During tax season, the partnership has to file a tax return that accounts for its income and losses. Personal liability is a main distress if you use a general partnership to develop your

LIMITED PARTNERSHIP: Two or more partners united to conduct a business jointly, and in which one or more of the partners is liable only to the extent of the amount of money that partner has invested. Limited partners do not receive dividends, but enjoy direct access to

each partner is liable only for the amount of money each one invested into the

Limited Partnership: this type of partnership has both general and limited partners. This partnership requires at least one general partner, who held unlimited personal liability for the debts and legal actions of the business. The general partners are jointly and severally liability for the all partnership debts, just like partners in a general partnership. Moreover, general partners are responsible for control the daily management of business and have authority to legally bind the business to a contract. This partnership need to filed information about the business and the partner at the appropriate state agency. On the other hand, limited partners have limited liability, they are only liability for the debts of the partnership just to the extent of their capital contribution. Furthermore, limited partners do not play an active role in the

To starts up a business there are 4 types of businesses to consider these are:

Before we can review each type of business entity, we need to cover a few characteristics that may differentiate each business structure: