There are many ways that business owners can choose to structure their companies. Some entrepreneurs choose to be sole proprietors, however, many businesses rely upon partnerships to help balance responsibilities to help assure greater success. Regardless of the choice, it is essential to take the time to structure business partnerships properly with the help of competent lawyers.
Organizational Structure
One of the most important business decisions made by any owner is selecting its organizational structure. Determining what form of business partnerships will exist is a part of this process. It may not seem that it will have much impact on daily operations, however, it ultimately sets the tone and hierarchy of the company.
Seeking the advice of legal counsel for advice on how to design potential or existing partnerships can prevent future problems. Making a less than desirable decision could negatively affect the business. In addition, there is official paperwork that needs to be prepared and filed that a business lawyer may assist with. Below are some of the basic business partnerships to consider.
1. General Partnership. Two or more persons own a business jointly, sharing both profits and losses. The parameters of the business are spelled out in a partnership agreement. Each partner may be potentially responsible for the liabilities of a business in their entirety. This relates to every aspect of the business, from operations to finances. Distribution of profit and loss is determined by a partnership agreement.
2. Limited Partnership. The structure and tax implications for this type of partnership are the same as for general partnerships. However, limited partnerships allow for one or more limited or silent partners to own portions of a business, although they do not participate in managing the business. Also, there is a general partner who bears personal responsibility for all partnership liabilities.
3. Limited Liability Partnership (LLP). At one time, law and accounting firms were prohibited from incorporating. LLPs came on the scene as a result of demand created by law and accounting firms to limit the level of liability between partners. The LLP is taxed as a partnership, however, there are limits as to liabilities of the partners similar to that of an LLC.
With every type of partnership there are variations for certain states. This is another reason that it is advisable to seek the advice of qualified professional business or commercial lawyers before proceeding with establishing any formal business partnership.
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This article was brought to you by CRH Brisbane Employment Lawyers. If you need any help on the legal aspects involved when setting up a business don't hesitate to visit us at http://www.crhlaw.com.au/main-menu/our-expertise/workplace-law/employment-contracts-and-workplace-disputes .
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