Association – Definition of associations
Friendship is essentially a partnership.. – Aristotle
[Partnership] – There are advantages and disadvantages in each business structure. Partnerships are not exactly the same as forming corporations or companies. Each society is defined through an agreement. Once you have decided on this business structure, it is important to know the differences. This article will define the different association structures. These structures are: (1) partnership, (2) limited partnership, and (3) limited liability company.
camaraderie – voluntary association of two or more persons as co-owners in a for-profit business.
A partnership may be formed voluntarily by the direct action of the parties, such as through a partnership agreement or articles of partnership, or its formation may be implied by the continued conduct of the parties. The financing of a partnership comes from the partners who initially contribute goods, cash or services to the partnership accounts. Each partner is both principal and agent of the other partners and is responsible both for the acts of the others and to others for individual acts. A company does not pay taxes. Simply file an information return. Each partner has the duty to contribute time to the management of the company, unless otherwise agreed. A partner cannot transfer his partnership status without the unanimous consent of the other partners. When a partner withdraws, retires or dies, the partnership is dissolved, but not terminated.
limited liability company it is a slight variation in the responsibility of those involved. The types of partners in a limited partnership include at least one general partner and one limited partner.
The limited company certificate is simply the public disclosure of the formation and existence of the limited company; it does not deal with the many more rights and obligations that the partners may agree to among themselves. Both general and limited partners make contributions upon entering the partnership. The main advantage of a limited partnership is limited personal liability. Limited partnerships are taxed in the same way as general partnerships. The authority of the general partner in a limited partnership is the same as the authority of the partners in a general partnership. The transfer restrictions are imposed in the interests of the limited partners. Upon dissolution, a partnership may continue (assuming a general partner remains); but the company can also be terminated after dissolution.
limited liability company – newer form of business organization, in which the liability of partners is limited.
State statutes for an LLP are strict with the formal requirements for creation. As in partnerships and limited partnerships, LLP partners make capital contributions. In most states with LLP statutes, partners are protected from liability for the negligence, wrongful acts, or misconduct of their partners. All LLP income is a flow or pass-through to partners. Partners can manage without risking personal liability exposures because the LLP is identified as such and registered with the state. Transferability is restricted and is governed by the same transmission principles as limited companies. Dissolution and termination are similar to the grounds for dissolution of limited partnerships with the requirement to notify the state.
Partnerships are relatively easy to set up and partners can share the initial cost. It is important that you define what type of partnership you want to have and take the time to develop a legal partnership agreement with a clear exit strategy. Understanding the differences is a step in the right direction to setting up the structure that works best for you as you “carve your own lane” to trading success.