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Partnerships

In this lesson, students will be able to identify characteristics of partnerships.

Students will be able to identify and/or define the following terms:

Partnership

General Partnership

Limited Partnership

Limited Liability Partnership

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Unlike a sole proprietorship, a partnershipis a business owned and operated by two

or more people.

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General Partnership

• The most common type of partnership is a general partnership.

• In a general partnership, all partners share equally in responsibility and liability.

• In a general partnership, all partners are responsible for the business.

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If you form a general partnership,your partner’s actions directly affect

you.

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Limited Partnership

• Another type of partnership is a limited partnership.

• In a limited partnership, one partner must be a general partner or responsible and liable for the business.

• The other partners are limited partners.

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The limited partner only contributes money and has limited liability.

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Limited Liability Partnership

• Only some individuals are allowed to form such partnerships.

• Doctors, lawyers, and accountants are allowed to form limited liability partnerships.

• In these partnerships, liability is limited.

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In limited liability partnerships (LLPs),each partner is a limited partner andonly responsible for his own actions.

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Liability

• It is important to remember that liability is the legal obligation to pay all debts.

• In the three different forms of partnerships, liability differs.

• The varying degrees of liability determine the various types of partnerships.

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General partners share equally in responsibility and liability.

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In a limited partnership, one partnermust be fully liable and responsible.

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The limited partner onlycontributes money and has

limited liability.

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In limited liability partnerships, allpartners have limited liability in

some situations.

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Questions for Reflection:

• List the three types of partnerships.

• Who is liable and responsible in a general partnership?

• How do limited partnerships function?

• Why would a partner chose to be a limited partner?

• Who is allowed to form a limited liability partnership? Why?