How Partnerships Work
Feb. 26, 2021
When people in South Carolina start a business, they need to think carefully about how to structure it because there are numerous options available. Sole proprietorships are a common way one person can start a small business. Unfortunately, they don’t provide a lot of protection from liability. Partnerships are a fine option when two or more entrepreneurs are involved.
Types of Partnerships
There are several ways to form a partnership. In a general partnership, everyone shares in all the profits and liabilities related to a business. Limited partnerships are a bit more complicated. These have one general partner who has full liability. The limited partners, by contrast, can only lose the amount they’ve invested in the venture. However, the limited partners also have less control.
Limited liability partnerships are a way to provide limited liability to all of the involved partners. Every involved partner is insulated from being held liable for the business’ debts. In an LLP structure, partners are not able to be held responsible for each other’s actions.
An LLP structure is often used by professionals. For example, many law firms are set up as limited liability partnerships. As companies grow, they may determine that an LLC or a corporation would be a more beneficial structure.
Professional Help with Business Formation
Business formation is complicated. The decisions people make when starting a company can have serious consequences, so it’s a good idea to get professional advice when setting up a company. An attorney who understands business law may be able to help entrepreneurs avoid common pitfalls. Other professionals who should be consulted include accountants who have experience working with startup businesses.