Partnerships

General Partnership

A partnership has two or more owners who share in the profits and losses of a business. A general partnership is the most basic form of a partnership. Forming a general partnership requires a minimal number of forms to be filed, but does require a signed partnership agreement. Some requirements and qualities of a general partnership include:

• Partnership Agreement: A general partnership requires a partnership agreement signed by all of the partners. It is important to consult a small business attorney about drafting a partnership agreement for you.
• Ability to Bind Partnership: Generally, all partners have the ability to bind the business to contracts, debts, and other obligations.
• Liability: Generally, all partners are jointly and severally liable and personally liable for the debts and liabilities of the business.
• Duties: Partners in a general partnership have fiduciary duties towards one another.

Limited Partnership (LP)

A limited partnership is one in which there is a general partner who is in charge of running the business and limited partners who invest in the business. A limited partnership differs in many ways from a general partnership. The primary distinction is that limited partners in a limited partnership have limited liability protection. Some other qualities unique to a limited partnership include:

• Business Entity: Unlike a general partnership, an LP requires formal creation of a business entity through the filing of a Certificate of Formation with the Texas Secretary of State.
• Liability Protection: While the limited partners in an LP have limited liability protection, the general partner is responsible for all debts and liabilities of the business.
• Business Control: In an LP the general partner has control over the management of the business while the limited partners are investors.
• Allocation of Profits: Unlike a general partnership, profits in an LP are generally not split evenly, but rather in a manner equivalent with the value or percentage of capital contribution from each limited partner.

Limited Liability Partnership (LLP)

A limited liability partnership, in Texas, is an entity in which all of the partners, whether general partners or limited partners, have liability protection. Either a general partnership or a limited partnership can apply with the State to become a limited liability partnership. Limited partnerships that become limited liability partnerships are also referred to as limited liability limited partnerships (LLLPs). If you are looking to start a partnership, it is important to consult a small business lawyer to determine which type of partnership may be best for you.