When incorporating a business in Delaware, it’s essential to establish roles and liabilities clearly. Two popular partnership structures are General Partnership and Limited Partnership. Here’s a breakdown of their differences to help you choose the right one for your business.
General Partnership:
A General Partnership is the most common type of partnership. In this structure:
•Shared Responsibilities: All partners actively contribute to the daily operations of the business and share equal liability.
•Decision-Making Power: Every partner has an equal say in critical decisions and binding agreements.
•Equal Ownership: By default, each partner shares equal responsibility for the business unless specified otherwise in a partnership agreement.
•Partnership Agreement: A formal agreement is recommended to outline each partner’s roles, liabilities, and authority within the business.
Limited Partnership:
A Limited Partnership differs significantly from a general partnership:
•Limited Involvement: Limited partners are not involved in the daily operations of the business. Their liability is tied solely to their financial contribution to the partnership.
•General Partner Requirement: There must be at least one general partner who manages the day-to-day activities. This partner bears full responsibility for the business, including potential legal and financial liabilities.
•Real Estate Popularity: Limited partnerships are common in real estate ventures, where a general partner handles operations, and limited partners contribute capital without being involved in management.
•Legal Protection: Limited partners should work with attorneys to ensure their limited liability is protected and not subject to personal risks.
While Limited Partnerships offer reduced liability, they limit a partner’s involvement in decision-making. General partners, on the other hand, carry more risk but retain control of the business.
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