Companies

A partnership is like a marriage between companies, in which two or more people with sole proprietorships decide to join together. Therefore, it can be said that they have married as a business.

This means that when a group of people form a business, and do not file paperwork to become a limited liability company or a corporation, they are then considered a partnership. It represents then that these partnerships are almost identical to sole proprietorships, so that all owners are legally and financially responsible for the business.

Characteristics of partnerships

In a company formed as a partnership, any of the individual partners may be sued for the entire capital of the company and each partner may also hold the others liable through the venture itself. Also, in the event of legal problems, all the property and capital of each partner can be used as collateral payments.

Partnerships are very similar to sole proprietorships, only the ownership of the business is shared by several people. In a partnership taxes are completely attached to the returns of its owners, a partnership does not file taxes on its own.

I don't know if you have ever been in a bad relationship, but if you have, you should be aware of all the financial and psychological damage that can come with it, especially when it ends. At the end of a bad relationship, usually its participants will not agree on almost any terms. But if, on the contrary, the relationship is healthy, with good communication there are almost no limits to the benefits it can have.

Types of partnerships

Within societies there are several types with differences between them:

• General Partnership: A general partnership is a type of partnership in which any one of the individual partners takes personal responsibility for every aspect of it and any one of them can force the others within the business into a business deal. This means that each of the owners exercises what is usually referred to as the representative power of the partnership.
• Limited Partnership: A limited partnership is when a general partner joins with one or more limited partners.

In this case the general partner fulfills the same role as in a general partnership, in which he exercises control over the normal business processes and is individually responsible for the financial status of the venture.

While the limited partners mostly play a role of financial support to the business, with little control over its management and operations. They also cannot be commercially linked to the business, which means that they cannot close deals on behalf of the business.

Thanks to this type of partnership, the limited partners are exempt from any personal legal liability and cannot be required by a court of law to pay the debts of the company with their personal resources. However, in case of lawsuits, their initial or subsequent investments may be lost.

In this type of business, the limited partner should always be separate from the administrative activities of the business, to ensure that his responsibilities to the business are limited. If he/she decides to become more involved in the management of the business, he/she will not be exempt from liability, just like the general partner.

Limited Liability Partnership or LLP

Limited liability partnerships, or LLP's, are a legal form of grouping businesses to minimize as much as possible the personal liability of its partners in case of lawsuits and debts.

In some places, this type of partnership may only be used by certain professions, such as doctors, lawyers or accountants, as it is more suited to the particularities of these professions.

In most cases, entrepreneurs prefer not to form a general partnership, in order to avoid personal liability at all costs, in case of problems between partners or in situations of malpractice suits.

This aspect also includes professionals in the world of coaching, which, as they are more recent in their conception, there are not many regulations on them. But, even if this is the case, a coach of any kind can be involved in a malpractice suit, so you should consider all the ways you can protect yourself.

You should make sure, no matter what type of business structure you end up choosing, that liability insurance is a vital tool for the safety of your business and you as the owner.

So, when you cannot form the business as a corporation because of its characteristics and size, in order to protect the personal assets of its partners, or in case the place where you live does not allow you to form an LLC, the best option is to form a limited liability company.

This form of grouping your business is the best way to protect its owners from the financial mishaps that come with potential lawsuits against any of its partners.

Partnership Tips

When forming a partnership, no matter what type of partnership, you must choose who you want to partner with. In addition, it is essential that the entire process be supervised by a lawyer, even if a lawyer is not legally required.

Partnerships formed by individuals who do not understand each other or who have very different perspectives regarding the business are not usually the most successful. In these partnerships it is not possible to implement actions to move the company forward, due to conflicts between partners.

If you decide to form a partnership, there are some aspects that you should always take into consideration, which should be written down in your partnership agreements:

• You must correctly place the first and last names of all partners involved in the process, as well as the date of creation, the money each partner intends to contribute, as well as their place in the company.
• In partnerships it is unusual for all partners to be able to invest the same amount of time and money in the company. Therefore, it must be clear and agreed from the beginning.
• If this step is not taken, most of the time one of the partners ends up contributing more hours