A partnership occurs when two or more people own the business. According to the website of Slater Pugh, Ltd. LLP, business owners looking to establish a partnership have a number of options available to them regarding what type of partnership they would like to form.

There are generally two kinds of partnership, known as general partnership and limited partnership – either has its own advantages over the other.

General Partnership

In a general partnership, all the owners have equal powers on the business. All of them have equal gravity of responsibility in managing the business, controlling operations, and having a say in executive decisions. This also means that they can equally enjoy the profits of the business, as well as suffer from the liabilities, such as debts and losses.

Limited Partnership

In a limited partnership, there are both general partners and limited partners, wherein the general partners enjoy the things said earlier. Unlike general partners, limited partners have no management control, but in return, at least they don’t have to fully suffer from the liabilities.

Comparisons

On paper, general partnership seems to be the better choice when it comes to forming a partnership, primarily because of how equal everything is. Owners rise together and fall together. But this can also have its problems.

The most significant problem here is regarding liability, because it is joint and several. So, if one of the general owners cannot pay his due debts, the creditor can go to the other general owners to get what it is due, even if these general owners have already paid their fair share.

Limited partnership, on the other hand, can be seen as mere “investors” in the business, in the sense that they may be considered partners in the business, but they have very limited control and at the same time very limited liability. The worst that could happen is for them to lose their “investments,” and nothing more.

Depending on what you want to achieve, either type of partnership can give you tremendous upside compared to the other.

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