A Limited Liability Partnership or LLP can be used by most businesses but is commonly used if you are an accountant, architects or lawyer as these types of businesses were not allowed to form Corporations due to the fact that the shareholders have a say in the business which is not ideal in professions that need to be personally licensed. A LLP remains within the control of partners and they are responsible for every aspect of the business.

Also if you want to limit your losses of your business to just your investments you can use an LLP, in the past certain professionals were personally liable for any losses of the business and there was no way of shielding themselves from creditors, when the Uniform Partnership Act came into force it was welcomed by businesses that wanted to protect their personal belongings from the what happened in their business and limit what they lost to their investments.

You need to look to your individual state legislation as to whether your business can be set up as a Limited Liability Partnership, as most some states only allow professional, for example accountants and lawyers/attorneys, to become a Limited Liability Partnership.

The process of forming a partnership is quite simple. It is the agreements between the partners that are often complex and time consuming. A partnership is defined as two or more people who must associate together to: carry on a business as co-owners, and to share it’s profits. If the intentions do not meet these requirements than a partnership has not been made. Therefore, it is not necessary for the agreement to be in writing or even expressed verbally for the the business to be called a partnership. When a court looks at the intentions of the parties, it looks like there is an implication of forming a partnership then the business will be qualified as a partnership for legal reasons.

Usually, if the business has instructed a lawyer at sometime during formation, the parties could have been strongly advised to create a Partnership Agreement. When parties are going into business together the do not think it is necessary to have an agreement as they already agree on how the business should be run, the profits shared, the contributions to be made and where the business should be in the future. The problems arise in the future and that is where the partnership agreement is an invaluable tool, as it will be first thing that your lawyer will ask for and base his case on. This stops the “he said she said” problem as inevitable over time, what was discussed initially becomes forgotten or misinterpreted at the time and escalates to a court case.

There are three types of partnership agreements that you can have:

1.  General Partnership
A general partnership is a business entity in which the partners own the business assets together. Unless a partnership agreement states otherwise, business profits and losses are shared by the partners equally, and each general partner has an equal right to participate in management and control of the business. It will be more common for the a partnership agreement provide for the manner in which profits and losses are to be shared.

2.  Limited Partnership

This business entity is exactly the same as a general partnership however one or more general partners manage the business while “limited” partners provide capital and share in the profits but take no part in running the business. In a limited partnership there must be at least one general partner who has unlimited personal liability.

This situation is very similar to an incorporated business, the shareholders are the investors and the directors are the general partners.

3.  Limited Liability Partnership

Limited liability partnership is a business structure that allows businesses to operate and function as a partnership while giving it the status of a separate legal person. LLP will be regarded in law as “bodies corporate” which is formed by being registered. Legal Documents @ Lawyer-Free Prices
Click here now.