Partnership ikn business terms can be simply defined as the coming together of two or more people to establish a profitable venture and it could be of different types which is why i will be explaining to you the most popular of all kinds of business partnerships.
First, let’s look at what a general partnership is. To create a general partnership, two or more individuals come together and agree to share all of the assets, profits, and liabilities related to a business.
When it comes to a general partnership, the partners both agree to unlimited liability. This means that in the event that the business has any legal or financial issues, all partners’ personal assets are equally on the line to make good on the business’s debts or obligations.
Additionally, all partners in a general partnership manage the day-to-day operations of the business. They’re all decision-makers and have equal say in the business.
A limited partnership is also a type of business partnership that requires two or more partners. Unlike general partners, though, where all partners play an equal part in running the business, a limited partner does not assist with day-to-day operations.
Plus, when it comes to liability, a limited partner has limited liability that equates to the amount of money they invested in the business. The general partner of the business will have unlimited liability. The limited partner doesn’t have control over business decisions and if they begin to exercise control, they can become more liable.
General Partnerships vs. Limited Partnerships Differences.
In some cases, you may want a partner who has a very hands-on role and who can help with the actual running of the business. In other cases, you may be looking for financial support, while also maintaining control over how your business is run. When it comes to the management of a business, and the responsibilities that follow, limited and general partnerships are very different.
Regarding liability, both general and limited partners will have some level of liability, but how much they are liable for will differ. Unless otherwise stated in the partnership agreement, general partners will all equally share in the profits, losses, and liabilities of the company. Their personal assets are equally liable for the business’s debts and obligations.