Types of Partnerships (General, Limited, LLP)

• General Partnership: All partners share management responsibilities and are personally liable for business debts.
• Limited Partnership (LP): Consists of general partners (who manage the business and are personally liable) and limited partners (who contribute capital but have limited liability).
• Limited Liability Partnership (LLP): All partners have limited liability, protecting them from personal responsibility for certain debts and obligations of the business.

Pros and Cons

Pros:

• Easy to establish.
• Combined resources and expertise.
• Shared decision-making and responsibilities.

Cons:

• Joint and several liability in a general partnership.
• Potential for conflicts between partners.
• Limited partners in an LP have no management authority.

Real-World Examples

Example: Tom and Lisa run a law firm as an LLP. This structure allows them to limit their personal liability while sharing management responsibilities. When a client sues the firm, Tom and Lisa’s personal assets are protected because of the LLP structure.