Partnership

Most partnerships are “general partnerships,” which means that each member is equally authorized to act on behalf of the company and each partner is liable for the partnership's debts. General partnerships are not taxed on income – the partners alone pay income tax. Probably, the most common form of a general partnership is an oral partnership. The great drawback to a general partnership is that it does not offer limited liability; each partner has unlimited liability for the debts of the partnership. The laws governing partnerships are very well developed. Formation of a partnership does not require a public filing to establish the entity and is not required to comply with the extensive record-keeping and regulatory formalities of other business forms. By its nature, a general partnership does not have a centralized management structure, must dissolve upon the death or withdrawal of any one member, and requires all partners’ consent to admit a new partner.

A limited partnership does not pay income tax, however, its formation requires the filing of papers and paying of fees to the state just as a corporation and limited liability company does. The limited partners can die or withdraw without ending the entity, and they can sell their interest without terminating the partnership. A limited partnership has centralized management of the “general partner” Only the limited partners have limited liability.

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