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Different Types of Partnership

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Published: Dec 18, 2018

Words: 701 | Pages: 2 | 4 min read

Capital – If there are more number of partners they can invest more capital to the business.
Flexible – Partnership businesses are easier to form and easier to run. Owners can decide the way that how the business should run.
Easy to make Decisions – Partners can easily take decisions according to the situation of the business.
Limited external regulations - When compared to the other types of businesses partnerships has less regulations.
Responsibility is shared – Partners can share the responsibilities among them. It will allow to partners to make their abilities better.
Disagreements – There can be disagreements between partners. It will be adisadvantage when making decisions.
Unlimited liability – Partners are subjects to unlimited liability which means each partners shares liability and all the risks including financial risks of the business.
Taxation – This is one of a major disadvantage of partnerships. Partners must pay tax each year.
Profits should be shared – All the earned profits should equally share among partners.
Limited liability for shareholders – As earlier mentioned the shareholders are liable only for their invested money.
Tax advantage and tax – These limited companies are only taxed on their profits.
Great Security – The limited Companies are totally separate from the directors and shareholders. Because of that their personal assets are not at any risk.
Respect – Setting up a “Limited “company it gives the directors an air of respect.
Pensions – Limited companies can fund their employees a legitimate expense.
Cost is high – Limited companies are expensive to establish.
Financial status are public – Company accounts and records are can be accessed by any person

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Building Your Business
Becoming an Owner
Business Types

Selecting a Business Partnership Type

What is a partnership, considering liability in partnerships, general partnership, limited partnership.

Limited Liability Partnership
LLC or Partnership

Partnerships and Tax Issues

Partnerships are a common option for people who want to go into business with other people. The term "partnership" has changed over the years, as business people have come to add new features to the old business form. The most used partnership types are listed here, with their features, to help you decide which type you might want to use.

A partnership is a business with several individuals, each of whom owns part of the business. The partners may be active participants in running the business or they may be passive investors. The relationship between the partners, the percentage and type of ownership, and the duties of partners is clarified in the partnership agreement .

In any partnership, each partner must "buy-in" or invest in the partnership. Usually, each partner's share of the partnership profits and losses is based on his or her percentage share of ownership.

Partnerships are formed by states and are subject to state laws, so some partnership types may not be available in some states. Check with your state's business division (usually part of the secretary of state department) for partnership information.

Two Types of Partners

The best way to start talking about a partnership business is to talk about the two types of partners : general partners and limited partners. Both invest in the business but they differ in their activity within the business.

General partners are active in the business, doing the work of the company (being CPAs, for example) but also participating in management and decision-making.
Limited partners are passive. They have invested in the business but they don't participate on a day-to-day basis in the running of the business.

There's actually a third kind of partner, the managing partner , a general partner who takes on added duties in the management of the partnership business affairs.

Depending on the type and amount of participation in the business, partners may be liable for debts of the business and for lawsuits against themselves personally.

You may see that some business names have the word "limited" in them, like a limited partnership, limited liability partnership, or limited liability company (LLC). The use of this word means that some owners have limited liability personally against lawsuits and debts.

A partner who has limited liability is only liable for their investment in the partnership. For example, if a partnership declares bankruptcy , the limited partners must pay only the amount of their investment.

General partners are similar to sole proprietors in terms of liability. In both cases, the owners are not separate from the business in terms of liability for the debts of the business and for their actions. That is, they have full liability.

That's why new partnership types are often set up as limited partnerships of some type, or to form partnerships with limited partners, to limit the liability of one partner for the actions of other partners.

Limited liability companies (LLCs) with more than one member (owner) are taxed like partnerships and they operate in similar ways. The advantage of an LLC over a general partnership is in the limited liability of all owners.

A general partnership is a partnership with only general partners . Each general partner must actively participate in managing the business and any partner may sign a contract on behalf of the partnership. The partners must agree to major decisions, acting as a corporate board of directors .

Advantage: Each partner can act independently, and each can invest in different types of capital. This partnership type also has low startup costs and few formalities.

Disadvantage: A general partnership operates as a sole proprietorship , with no separation between the partners and the business. Because general partners actively participate, their liability is not limited, as described above. If one partner is sued, all partners are held liable. A partner's personal assets may be taken by a court or creditor.

A limited partnership includes both general partners and at least one limited partner. In many cases, there is one general partner who manages the business and a number of limited partners. A limited partner does not participate in the day-to-day management of the partnership and their liability is limited to their investment in the business.

Advantage: The limited partners are merely investors who don't want to participate in the partnership other than to provide capital and to receive a share of the profits. You may want to use the limited partnership option to form a partnership, for example, with relatives or friends who just want to invest.

Disadvantage: Because limited partners don't participate in management , they are considered passive investors. This means they can only take losses up to the amount of their income for the year.

Limited Liability Partnerships

A limited liability partnership (LLP) is different from a limited partnership or a general partnership but is closer to a limited liability company (LLC) . In the LLP, all partners have limited liability. LLP's are often formed by groups of professionals who want to pool their resources and save money by sharing space.

Advantage: Unlike the limited partnership, general partners in an LLP have limited liability.

Disadvantage: Because liability for all partners is limited, some businesses or individuals may be wary of doing business with the partnership.

LLC or Partnership?

In recent years, the limited liability company has become more common than the general partnership and the limited partnership, because it has more limited liability for the owners (as the name suggests).

But there are still cases in professional practices (law, accounting, architecture, for example) in which some partners want to be limited in the scope of duties and they just want to invest, having the liability protection of being in a limited partnership.

While a multiple-member (owner) LLC is taxed like a partnership, there are differences in liability and in other ownership provisions. The main difference is that all owners of an LLC (called "members") have limited liability while in a partnership the partners running the business have general liability for everything that happens.

Joint Ventures as Partnerships

The Small Business Administration lists a joint venture as a type of partnership. A joint venture is typically a partnership between different businesses formed for a specific purpose (like making a movie or building a structure) or for a specified time period.

Qualified Joint Ventures as Partnerships

A qualified joint venture is a special kind of partnership in which two spouses who jointly own a business (not a corporation) can elect to file their income taxes separately to avoid having a file a complicated partnership tax return. In this case, each spouse files a Schedule C for their share of the net income of the business. If the couple is filing jointly, both Schedule C's are included in the joint tax return.

As you are considering a partnership type, you should also consider how a partnership is taxed. The partnership, as a whole, files an information-only return on Form 1065 , and the individual partners receive a Schedule K-1 showing the share of the partnership profits or losses for the year. The Schedule K-1 is included in each partner's personal tax return, so each partner pays income tax on their share of the net income of the partnership.

Read more about how a partnership pays income taxes .

If you are interested in starting a partnership, this article takes you through the process step by step .

Richmond School of Law. " Limited Partnerships ." Page 2. Accessed Aug. 7, 2020.

Cornell Legal Information Institute. " Limited Liability ." Accessed Aug. 7, 2020.

Richmond School of Law. " General Partnerships ." Accessed Aug. 7, 2020.

Small Business Administration. " Choose a Business Structure ." Accessed Aug. 7, 2020.

IRS. " Publication 925 Passive Activity and At-Risk Rules ." Page 2. Accessed Aug. 7, 2020.

Richmond School of Law. " Limited Liability Partnerships ." Page 1. Accessed Aug. 7, 2020.

IRS. " Election for Married Couples Unincorporated Businesses ." Accessed Aug. 7, 2020.

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Essay on partnership: definition, features, advantages and limitations.

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Read this article to learn about the definition, features, advantages and limitations of partnership.

Partnership Defined:

Partnership is very comprehensively defined in the Indian Partnership Act, 1932.

The definition of the act runs as follows:

“Partnership is the relation between (or among) persons who have agreed to share the profits of a business carried on by all or any of them acting for all.”

Point of comment:

The most significant aspect of partnership as per the above definition is that partnership is a relation among persons; and this relation is that of being a partner with one another-very much like relations subsisting among members of a family i.e. relation of brotherhood, sisterhood, parenthood etc.

Partnership relation is a relation of utmost good faith among persons, who want to be partners with one another. Each partner must observe utmost good faith towards each other, while engaged in business dealings.

Following are cited some other important definitions of partnership:

(1) “Two or more individuals may form a partnership by making a written or oral agreement that they will jointly assume full responsibility for the conduct of a business.” —Dr. J.A. Shubin.

(2) “Partnership is the relation between persons competent to make contract, who agree to carry on a lawful business in common with a view to private gain.” —L.H. Haney. Point of explanation:

The persons who enter into partnership are individually called partners, and collectively a firm. The name under which partners carry on business is called the firm name.

Features of Partnership:

Following are the salient features of partnership:

(i) Agreement:

Partnership relation is the result of an agreement between/among two or more persons. The agreement may be oral or written. A written agreement of partnership is known as the Partnership Deed.

(ii) Two or More Persons:

There must be a least two persons to form a partnership. The maximum number of persons in partnership is 10, in case of banking business; and 20 in other types of businesses.

(iii) Lawful Business:

A partnership can be formed for the purpose of carrying on any lawful business. There can be no partnership for engaging in illegal acts like theft, dacoity, smuggling etc.

(iv) Sharing of Profits:

The agreement of partnership must provide for sharing of profits of a business, among partners, in the agreed ratio. Sharing of profits is an important test of partnership. In the absence of an agreed ratio, profits are to be shared equally, by all partners.

Sharing of profits implies sharing of losses also, in the same ratio, in which profits are shared by partners.

(v) Mutual Agency:

The phrase ‘carried on by all or any of them acting for all’, contained in the definition of partnership, as given in the Partnership Act, points out to the element of mutual agency of partnership.

Mutual Agency Implies:

That every partner is an agent of the firm, for purposes of the business of the firm, and every partner is the principal to be bound by the acts of other partners, who act as agents. In fact, mutual agency is the final and conclusive proof of the existence of partnership.

(vi) Unlimited Liability:

The liability of all partners is unlimited-jointly and severally, i.e. each partner is liable to pay debts of the firm to an unlimited extent along with other partners; and if the assets of other partners are insufficient to pay business liabilities, then any one partner could be held liable to pay business debts to an unlimited extent, in his individual capacity.

(vii) Ownership and Control Jointly Held:

Normally, every partner has a right to take part, in the management of the business of the firm i.e. ownership and control are jointly held by all partners.

(viii) Non-Transferability of Share:

No partner can transfer his/her share in the partnership to any other person, without the prior consent of all other partners.

(ix) Registration not Compulsory:

Registration of a partnership firm is not compulsory. However, an unregistered firm suffers from such serious disabilities; so that sooner or later, every firm will like to get itself registered.

Advantages of Partnership:

Following are the advantages of partnership:

(i) Ease of Formation:

Formation of partnership is an easy affair. What is required is just an agreement of partnership among two or more persons; which may ever be an oral agreement. No registration of partnership is required by Law.

(ii) Large Financial Resources:

Partnership commands large financial resources; because as much as twenty persons are permitted to start partnership business. Further, the fact of unlimited liability of partners (which is both joint and several) also increases the borrowing capacity of the firm.

(iii) Balanced Decision-Making:

Partnership not only pools resources; it also combines the abilities and wisdom of a large number of persons. As such, in partnership the managerial decision-making tends to be sound and balanced, which ensures more of success of partnership business.

(iv) Incentive to Work Hard:

In partnership, there is an incentive to work hard for all partners because of the following reasons:

(a) Higher profits of the firm, as a result of hard work, will entitle partners to a larger share in the profits of the firm.

(b) By working hard, partners will try to avoid the undesirable consequences of unlimited liability; which will fall on them-in case they work carelessly.

(v) Ensures Status to all Partners:

Partnership ensures status to all partners. Every partner has a right to take part in the management of the firm. All important decisions of the firm are taken with the mutual consent of all the partners.

(vi) Secrecy of Business Affairs Maintained:

In partnership, the secrecy of business affairs could be easily maintained; since all partners have common interest in maintaining secrecy of business affairs. In fact, in partnership all partners swim and sink together.

(vii) Divided Risk:

In partnership, the business risks are divided among all partners. As such, partners could afford to be bold in taking risky, profitable and adventurous decisions.

(viii) Advantage of Partners’ Specialisation:

Usually, in partnership, the partners tend to be specialists in various areas e.g. purchasing, marketing, finance etc. Thus partnership is able to take advantage of the specialisation of many persons; each one being an expert in a particular aspect of partnership affairs.

(ix) Flexibility of Operations:

Partnership ensures flexibility of business operations. Partners can take immediate decisions to effect changes in the functioning of the business, to take the best advantage of the changing circumstances.

Limitations of Partnership:

Following are the important limitations of partnership:

(i) Unlimited Liability:

The fact of unlimited liability is perhaps, the serious-most limitation of partnership. Many good persons never have the idea of entering into a partnership agreement with others. Further, partners always try to follow most traditional systems of managing, which ensure safest business dealings. As such, partners rarely take bold decisions and restrict the growth of the firm through their conservative approach.

(ii) Uncertainty of Existence:

Life of partnership is most uncertain. Differences among partners, which are so natural now-a-days, may lead to dissolution of a well-running partnership firm.

(iii) Delayed Decision-Making:

All major decisions in partnership are taken with the mutual consent of all the partners; which may not be so easy to emerge as expected in theory. As such, partners may miss many opportunities for gain either due to delayed decisions or lack of consensus.

(iv) Risk of Implied Authority of Partners:

Every partner is an agent of the firm for purposes of the business of the firm. A dishonest or careless partner may land the firm in great difficulties because of his wrong actions.

(v) Fear of Competitive Business:

There may be a fear of a competitive business, in partnership, from partners themselves. A partner, having stolen the secrets of business of the firm may disassociate from the firm and start a competitive business of his own.

(vi) Unsuitable for Big Ventures:

Financial resources and managerial capacity of the partners are rather limited. Even a very well running and sound partnership may find itself unable to undertake very big business projects.

(vii) Non-Transferability of Ownership:

A partner cannot transfer his ownership interest in the firm to others, without consent of all other partners. This means, having invested in a partnership firm, a person may find his capital absolutely blocked in a particular business. Many persons are hesitant to become partners, on this ground.

Advantages and Limitations of Partnership-at a Glance

14 Important Characteristics of a Partnership Firm
Rights and Obligations of Partners as Mentioned in the Partnership Act

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What Is a Partnership?

Advantages and Disadvantages

Partnerships by Country

Partnership FAQs

The Bottom Line

Types of Corporations

Partnership: Definition, How It Works, Taxation, and Types

Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.

A partnership is a formal arrangement by two or more parties to manage and operate a business and share its profits.

There are several types of partnership arrangements. In particular, in a partnership business, all partners share liabilities and profits equally, while in others, partners may have limited liability . There also is the so-called "silent partner," in which one party is not involved in the day-to-day operations of the business.

Key Takeaways

A partnership is an arrangement between two or more people to oversee business operations and share its profits and liabilities.
In a general partnership company, all members share both profits and liabilities.
Professionals like doctors and lawyers often form a limited liability partnership.
There may be tax benefits to a partnership compared to a corporation.

Investopedia / Matthew Collins

Types of Partnerships

In a broad sense, a partnership can be any endeavor undertaken jointly by multiple parties. The parties may be governments, nonprofits enterprises, businesses, or private individuals. The goals of a partnership also vary widely.

Within the narrow sense of a for-profit venture undertaken by two or more individuals, there are three main categories of partnership: general partnership , limited partnership, and limited liability partnership.

General Partnership

In a general partnership, all parties share legal and financial liability equally. The individuals are personally responsible for the debts the partnership takes on. Profits are also shared equally. The specifics of profit sharing will almost certainly be laid out in writing in a partnership agreement.

When drafting a partnership agreement, an expulsion clause should be included, detailing what events are grounds for expelling a partner.

Limited Liability Partnership

Limited liability partnerships (LLPs) are a common structure for professionals, such as accountants, lawyers, and architects. This arrangement limits partners' personal liability so that, for example, if one partner is sued for malpractice, the assets of other partners are not at risk.

Some law and accounting firms make a further distinction between equity partners and salaried partners. The latter is more senior than associates but does not have an ownership stake. They are generally paid bonuses based on the firm's profits.

Limited Partnership

Limited partnerships are a hybrid of general partnerships and limited liability partnerships. At least one partner must be a general partner, with full personal liability for the partnership's debts. At least one other is a silent partner whose liability is limited to the amount invested. This silent partner generally does not participate in the management or day-to-day operation of the partnership.

Finally, the awkwardly-named limited liability limited partnership is a new and relatively uncommon variety. This is a limited partnership that provides a greater shield from liability for its general partners.

Taxes and Partnerships

There is no federal statute defining partnerships, but nevertheless, the Internal Revenue Code (Chapter 1, Subchapter K) includes detailed rules on their federal tax treatment.

Partnerships do not pay income tax. The tax responsibility passes through to the partners, who are not considered employees for tax purposes.

Individuals in partnerships may receive more favorable tax treatment than if they founded a corporation. That is, corporate profits are taxed, as are the dividends paid to owners or shareholders. Partnerships' profits, on the other hand, are not double-taxed in this way.

Advantages and Disadvantages of Partnerships

A successful partnership can help a business thrive by allowing partners to pool their resources and labor. Most sole proprietors do not have the time or resources to run a successful business alone, and the startup stage can be the most time-consuming.

Creating a partnership allows the partners to benefit from one another's labor, time, and expertise. Moreover, a shrewd partner can also provide additional perspectives and insights that can help the business grow.

But there is also an additional risk in joining a partnership. In addition to sharing profits, the partners may also assume responsibility for any losses or debts from the other partners. There is also a higher chance of conflict or mismanagement. When the time comes to exit, it may be harder to reach an agreement about selling the business.

Pros and Cons of Partnership

Partners can pool their labor, capital and expertise.

Partners can share tasks, allowing greater work-life balance.

More partners can bring their experience and new perspectives to the firm.

Partners may bring additional debts or liabilities.

There is a greater chance of disagreement or mismanagement.

It may become harder to sell the business.

The basic varieties of partnerships can be found throughout common law jurisdictions, such as the United States, the U.K., and the Commonwealth nations. There are, however, differences in the laws governing them in each jurisdiction.

The U.S. has no federal statute that defines the various forms of partnership. However, every state except Louisiana has adopted one form or another of the Uniform Partnership Act ; so, the laws are similar from state to state. The standard version of the act defines the partnership as a separate legal entity from its partners, which is a departure from the previous legal treatment of partnerships.

Other common law jurisdictions, including England, do not consider partnerships to be independent legal entities.

How Does a Partnership Differ From Other Forms of Business Organization?

A partnership is a way of structuring a business that involves two or more individuals (the partners). It involves a contractual agreement (the partnership agreement) between all of the partners that set the terms and conditions of their business relationship, including the distribution of ownership, responsibilities, and profits and losses. Partnerships outline and clearly define a business relationship and responsibility.

Unlike LLCs or corporations, however, partners are personally held liable for any business debts of the partnership, which means that creditors or other claimants can go after the partners' personal assets. Because of this, individuals who wish to form a partnership should be extremely selective when choosing partners.

If Partners Don't Have Limited Liability Why Set Up a Partnership?

Partnerships have several benefits. They are often easier to set up than LLCs or corporations and do not involve a formal incorporation process through a government. This has the added benefit of not being subject to the same rules and regulations that apply to corporations and LLCs. Partnerships also tend to be more tax-friendly.

What About Limited Partnerships?

In limited partnerships (LPs), there are general partners who maintain operations of the firm and have full liability, whereas limited (silent) partners, who are often passive investors or otherwise not involved in day-to-day operations, enjoy limited liability. A limited liability partnership (LLP) is different from an LP. In an LLP, partners are not exempt from liability for the debts of the partnership, but they may be exempt from liability for the actions of other partners. A limited liability limited partnership (LLLP) is a relatively new business form that combines aspects of LPs and LLPs.

Do Partnerships Pay Taxes?

The partnership itself does not pay business taxes. Instead, taxes are passed through to the individual partners to file on their own tax returns, often via a Schedule K .

What Types of Businesses Are Best-Suited for Partnerships?

Partnerships are often best for a group of professionals in the same line of work where each partner has an active role in running the business. These often include medical professionals, lawyers, accountants, consultants, finance & investing, and architects.

A partnership is a legal arrangement that allows two or more people to share responsibility for a business. Those partners share the ownership and profits, but they also share the work, responsibility, and potential losses. A successful partnership can give a new business more opportunities to succeed, but a poorly-thought out one can cause mismanagement and disagreements.

U.S. Small Business Administration. " Choose a Business Structure ."

Utah Department of Commerce. " Limited Liability Limited Partnerships ."

U.S. Congress. " U.S. Code, Section 26, Subtitle A, Chapter 1, Subchapter K: Partners and Partnerships ."

Uniform Law Commission. " Partnership Act ."

National Conference of Commissioners on Uniform State Laws. " Uniform Partnership Act (1997) ," Page 91.

Thompson Reuters Practical Law. " Partnership ."

Internal Revenue Service. " Tax Information for Partnerships ."

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Partnership: Introduction, Features, Types of Partners, Solved Questions

When we talk about the forms a business organisation can take, one of the most prominent ones is a partnership. In India particularly it is a very popular entity to carry out business. Let us take a look at some important features of a partnership and also some types of partners.

Partnership

In India, we have a definite law that covers all aspects and functioning of a partnership, The Indian Partnership Act 1932. The act also defines a partnership as “the relation between two or more persons who have agreed to share the profits from a business carried on by either all of them or any of them on behalf of/acting for all”

So in such a case two or more (maximum numbers will differ according to the business being carried) persons come together as a unit to achieve some common objective. And the profits earned in pursuit of this objective will be shared amongst themselves.

The entity is collectively called a “Partnership Firm” and all the individual members are the “Partners”. So let us look at some important features.

Features of a Partnership

1] formation/partnership agreement.

A partnership firm is not a separate legal entity. But according to the act, a firm must be formed via a legal agreement between all the partners. So a contract must be entered into to form a partnership firm.

Its business activity must be lawful, and the motive should be one of profit . So two people forming an alliance to carry out charity and/or social work will not constitute this form of organisation. Similarly, a partnership contract to carry out illegal work, such as smuggling, is void as well.

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2] Unlimited Liability

In a unique feature, all partners have unlimited liability in the business. The partners are all individually and jointly liable for the firm and the payment of all debts. This means that even personal assets of a partner can be liquidated to meet the debts of the firm.

If the money is recovered from a single partner, he can, in turn, sue the other partners for their share of the debt as per the contract of the partnership.

3] Continuity

A partnership cannot carry out in perpetuity. The death or retirement or bankruptcy or insolvency or insanity of a partner will dissolve the firm. The remaining partners may continue the partnership if they so choose, but a new contract must be drawn up. Also, the partnership of a father cannot be inherited by his son. If all the other partners agree, he can be added on as a new partner.

4] Number of Members

As we know that there should be a minimum of two members. However, the maximum number will vary according to a few conditions. The Partnership Act itself is silent on this issue, but the Companies Act, 2013 provides clarity.

For a banking business, the number of partners must not exceed ten. For a business of any other nature, the maximum number is twenty. If the number of partners increases it will become an illegal entity or association.

5] Mutual Agency

In this type of organisation, the business must be carried out by all the partners together. Or alternatively, it can be carried out by any of the partners (one or several) acting for all of them or on behalf of all of them. So this means every partner is an agent as well as the principal of the partnership.

He represents the other partners in some cases so he is their agent. But in other circumstances, he is bound by the actions of any of the other partners aking him the principal as well.

Types of Partners

Not all partners of a firm have the same responsibilities and functions. There can be various types of partners in a partnership. Let us study the types of partners and their rights and duties.

Active Partner : As the name suggests he takes active participation in the business of the firm. He contributes to the capital, has a share in the profit and also participates in the daily activities of the firm. His liability in the firm will be unlimited. And he often will act as an agent for the other partners.
Dormant Partner : Also known as a sleeping partner, he will not participate in the daily functioning of the business. But he will still have to make his share of contribution to the capital. In return, he will have a share in the profits. His liability will also be unlimited.
Secret Partner : Here the partner’s association with the firm is not public knowledge. He will not represent the firm to outside agents or parties. Other than this his participation with respect to capital , profits, management and liability will be the same as all the other partners.
Nominal Partner : This partner is only a partner in name. He allows the firm to use the name of his firm, and the attached goodwill . But he in no way contributes to the capital and hence has no share in the profits. He does not involve himself in the firm’s business. But his liability too will be unlimited.
Partner by Estoppel : If a person makes it out to be, through their conduct or behaviour, that they are partners in a firm and he does not correct them, then he becomes a partner by estoppel. However, this partner too will have unlimited liability.

There can be general partnership with general partners, limited partnerships (or limited liability partnership) etc.

Solved question for you.

Q: What are the advantages of a partnership?

Ans: Partnerships have many advantages as a form of business, such as

Formation of partnerships firm is an easy task. You only require a contract of partnership. Registration is not compulsory in most cases.
Since many partners are involved in a business they all bring their own expertise and management styles. This helps in better management of the business.
All partners also contribute to the capital of the firm so it has more funds to work with
The risk of the business is also shared among all partners.

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Home Resources Business Types of Partnerships

Types of Partnerships: General, Limited & Limited Liability

Updated July 2, 2023 | Written by Mollie Moric Reviewed by Brooke Davis

There are three main types of partnerships to choose from general (GP), limited (LP), and limited liability (LLP). The one you choose to form will have distinct implications on how your business operates.

Continue reading to help you and your partner(s) determine the proper structure for your business.

Partnerships are famous business structures because they’re quick and easy to form, with little or no formal documentation required by law.

If you do choose to operate your business as a partnership, use a partnership agreement to detail the terms of the relationship, such as your:

Partner’s information
Profit and loss distributions
Initial contributions
Management structure
Description of operations
Type of partnership

Main Types of Partnerships in Business

Tax protocol for different types of partnerships.

Types of Partnerships - Pros & Cons

Types of Partners

How to Document the Type of Partnership You’ve Selected

There are three common types of partnership arrangements: general, limited, and limited liability.

1. General Partnership (GP)

How they’re structured.

In a general partnership, all partners share equal rights and responsibilities , and each partner can sign contracts on behalf of the business.

The partners or non-partner managers (like a corporate board of directors) must obtain a unanimous or majority agreement before making significant decisions.

Liability implications

Along with sharing profits and losses, partners assume unlimited liability for the debts and obligations of the partnership — known as joint and several liability .

This means that if the partnership is sued because of the negligence of a partner, the other partners are also held liable, and a creditor may seize their assets.

Why choose a general partnership?

Partners are not required to create or file any formation documentation to formally establish a general partnership and begin operating, making them a convenient option.

2. Limited Partnership (LP)

A limited partnership is made up of general and limited partners . Both types of partners are entitled to business profits but have different roles and degrees of liability.

A limited partnership needs at least one general partner to function because they’re responsible for running the business.

Limited partners, often called silent partners, contribute capital to the partnership but don’t manage daily operations.

Liability Implications

General partners must also accept full joint and several liabilities for the partnership’s debts and obligations. Limited partners are not liable for the actions of the partnership or its general partner.

Why choose a limited partnership?

A limited liability partnership is an attractive option if you have investors who want to contribute to the company financially but don’t want to deal with management responsibilities or liability.

3. Limited Liability Partnership (LLP)

Limited liability partnerships combine the tax benefits of a general partnership with the personal liability protection of a limited liability company.

Each partner can choose how much they’d like to invest in the partnership and their level of involvement in the business.

All LLP partners are essentially general partners but with limited liability — in other words, they’re not personally liable for business debts and obligations or the other partners’ errors, omissions, negligence, incompetence, or malpractice.

For example, if one partner is sued for negligence, the other partners are not legally accountable for their actions.

Why choose a limited liability partnership?

Professionals often create limited liability partnerships to optimize resources and save money.

For example, two dentists might form a limited liability partnership to share the costs of renting and renovating office space, buying expensive dental equipment, and hiring staff.

In some states, LLPs are limited to professional partnerships, such as doctors, lawyers, architects, accountants, and dentists. Unlike other types of partnerships, LLPs must be registered with the state and require a written agreement.

The tax protocol for general, limited, and limited liability partnerships are the same:

the partnership files Form 1065 with the IRS, and each owner files a Schedule K with the IRS,
each owner files a Schedule K in their tax return, showing their share of the partnership profits or losses for the year.

Each partner pays income tax on their share of the net income.

While LLPs are taxed as partnerships at the federal level, some states may impose non-partnership taxes on limited liability partnerships .

For example, Texas LLPs have to pay a franchise tax along with corporations and LLCs.

Types of Partnerships – Pros & Cons

Here’s a chart detailing the pros and cons of each type of partnership business to help you decide which one is right for you:

You can be a general or limited partner in a partnership. Ensure you understand the rights and responsibilities (as well as the limitations) of being either type before filing any documents.

General Partners

A general partner manages the business and takes responsibility for its day-to-day operations. They’re fully liable for the partnership’s debts, and their assets can be seized to settle debt obligations or lawsuits.

Limited Partners

Limited partners hold financial stakes in the business but don’t play a role in management. Therefore, limited partners are not personally liable for their debt; the most they can lose is whatever they’ve invested.

How to Document the Type of Partnership You’ve Selected

The type of partnership you select will impact your company’s management, taxation, legal status, investment, and start-up requirements.

Once you and your business partners have decided whether to operate as a general, limited, or limited liability partnership, document the arrangement’s terms in a partnership agreement.

General Partnership Agreement
Limited Partnership Agreement
Limited Liability Partnership Agreement
50/50 Partnership Agreement
Real Estate Partnership Agreement
Small Business Partnership Agreement

Mollie Moric

Legal Content Writer

Mollie Moric is a staff writer at Legal Templates. She translates complex legal concepts into easy to understand articles that empower readers in their legal pursuits. Her legal advice and analysis...

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Knowledge Base
How to structure an essay: Templates and tips

How to Structure an Essay | Tips & Templates

Published on September 18, 2020 by Jack Caulfield . Revised on July 23, 2023.

The basic structure of an essay always consists of an introduction , a body , and a conclusion . But for many students, the most difficult part of structuring an essay is deciding how to organize information within the body.

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The basics of essay structure, chronological structure, compare-and-contrast structure, problems-methods-solutions structure, signposting to clarify your structure, other interesting articles, frequently asked questions about essay structure.

There are two main things to keep in mind when working on your essay structure: making sure to include the right information in each part, and deciding how you’ll organize the information within the body.

Parts of an essay

The three parts that make up all essays are described in the table below.

Order of information

You’ll also have to consider how to present information within the body. There are a few general principles that can guide you here.

The first is that your argument should move from the simplest claim to the most complex . The body of a good argumentative essay often begins with simple and widely accepted claims, and then moves towards more complex and contentious ones.

For example, you might begin by describing a generally accepted philosophical concept, and then apply it to a new topic. The grounding in the general concept will allow the reader to understand your unique application of it.

The second principle is that background information should appear towards the beginning of your essay . General background is presented in the introduction. If you have additional background to present, this information will usually come at the start of the body.

The third principle is that everything in your essay should be relevant to the thesis . Ask yourself whether each piece of information advances your argument or provides necessary background. And make sure that the text clearly expresses each piece of information’s relevance.

The sections below present several organizational templates for essays: the chronological approach, the compare-and-contrast approach, and the problems-methods-solutions approach.

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The chronological approach (sometimes called the cause-and-effect approach) is probably the simplest way to structure an essay. It just means discussing events in the order in which they occurred, discussing how they are related (i.e. the cause and effect involved) as you go.

A chronological approach can be useful when your essay is about a series of events. Don’t rule out other approaches, though—even when the chronological approach is the obvious one, you might be able to bring out more with a different structure.

Explore the tabs below to see a general template and a specific example outline from an essay on the invention of the printing press.

Thesis statement
Discussion of event/period
Consequences
Importance of topic
Strong closing statement
Claim that the printing press marks the end of the Middle Ages
Background on the low levels of literacy before the printing press
Thesis statement: The invention of the printing press increased circulation of information in Europe, paving the way for the Reformation
High levels of illiteracy in medieval Europe
Literacy and thus knowledge and education were mainly the domain of religious and political elites
Consequence: this discouraged political and religious change
Invention of the printing press in 1440 by Johannes Gutenberg
Implications of the new technology for book production
Consequence: Rapid spread of the technology and the printing of the Gutenberg Bible
Trend for translating the Bible into vernacular languages during the years following the printing press’s invention
Luther’s own translation of the Bible during the Reformation
Consequence: The large-scale effects the Reformation would have on religion and politics
Summarize the history described
Stress the significance of the printing press to the events of this period

Essays with two or more main subjects are often structured around comparing and contrasting . For example, a literary analysis essay might compare two different texts, and an argumentative essay might compare the strengths of different arguments.

There are two main ways of structuring a compare-and-contrast essay: the alternating method, and the block method.

Alternating

In the alternating method, each paragraph compares your subjects in terms of a specific point of comparison. These points of comparison are therefore what defines each paragraph.

The tabs below show a general template for this structure, and a specific example for an essay comparing and contrasting distance learning with traditional classroom learning.

Synthesis of arguments
Topical relevance of distance learning in lockdown
Increasing prevalence of distance learning over the last decade
Thesis statement: While distance learning has certain advantages, it introduces multiple new accessibility issues that must be addressed for it to be as effective as classroom learning
Classroom learning: Ease of identifying difficulties and privately discussing them
Distance learning: Difficulty of noticing and unobtrusively helping
Classroom learning: Difficulties accessing the classroom (disability, distance travelled from home)
Distance learning: Difficulties with online work (lack of tech literacy, unreliable connection, distractions)
Classroom learning: Tends to encourage personal engagement among students and with teacher, more relaxed social environment
Distance learning: Greater ability to reach out to teacher privately
Sum up, emphasize that distance learning introduces more difficulties than it solves
Stress the importance of addressing issues with distance learning as it becomes increasingly common
Distance learning may prove to be the future, but it still has a long way to go

In the block method, each subject is covered all in one go, potentially across multiple paragraphs. For example, you might write two paragraphs about your first subject and then two about your second subject, making comparisons back to the first.

The tabs again show a general template, followed by another essay on distance learning, this time with the body structured in blocks.

Point 1 (compare)
Point 2 (compare)
Point 3 (compare)
Point 4 (compare)
Advantages: Flexibility, accessibility
Disadvantages: Discomfort, challenges for those with poor internet or tech literacy
Advantages: Potential for teacher to discuss issues with a student in a separate private call
Disadvantages: Difficulty of identifying struggling students and aiding them unobtrusively, lack of personal interaction among students
Advantages: More accessible to those with low tech literacy, equality of all sharing one learning environment
Disadvantages: Students must live close enough to attend, commutes may vary, classrooms not always accessible for disabled students
Advantages: Ease of picking up on signs a student is struggling, more personal interaction among students
Disadvantages: May be harder for students to approach teacher privately in person to raise issues

An essay that concerns a specific problem (practical or theoretical) may be structured according to the problems-methods-solutions approach.

This is just what it sounds like: You define the problem, characterize a method or theory that may solve it, and finally analyze the problem, using this method or theory to arrive at a solution. If the problem is theoretical, the solution might be the analysis you present in the essay itself; otherwise, you might just present a proposed solution.

The tabs below show a template for this structure and an example outline for an essay about the problem of fake news.

Introduce the problem
Provide background
Describe your approach to solving it
Define the problem precisely
Describe why it’s important
Indicate previous approaches to the problem
Present your new approach, and why it’s better
Apply the new method or theory to the problem
Indicate the solution you arrive at by doing so
Assess (potential or actual) effectiveness of solution
Describe the implications
Problem: The growth of “fake news” online
Prevalence of polarized/conspiracy-focused news sources online
Thesis statement: Rather than attempting to stamp out online fake news through social media moderation, an effective approach to combating it must work with educational institutions to improve media literacy
Definition: Deliberate disinformation designed to spread virally online
Popularization of the term, growth of the phenomenon
Previous approaches: Labeling and moderation on social media platforms
Critique: This approach feeds conspiracies; the real solution is to improve media literacy so users can better identify fake news
Greater emphasis should be placed on media literacy education in schools
This allows people to assess news sources independently, rather than just being told which ones to trust
This is a long-term solution but could be highly effective
It would require significant organization and investment, but would equip people to judge news sources more effectively
Rather than trying to contain the spread of fake news, we must teach the next generation not to fall for it

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Signposting means guiding the reader through your essay with language that describes or hints at the structure of what follows. It can help you clarify your structure for yourself as well as helping your reader follow your ideas.

The essay overview

In longer essays whose body is split into multiple named sections, the introduction often ends with an overview of the rest of the essay. This gives a brief description of the main idea or argument of each section.

The overview allows the reader to immediately understand what will be covered in the essay and in what order. Though it describes what comes later in the text, it is generally written in the present tense . The following example is from a literary analysis essay on Mary Shelley’s Frankenstein .

Transitions

Transition words and phrases are used throughout all good essays to link together different ideas. They help guide the reader through your text, and an essay that uses them effectively will be much easier to follow.

Various different relationships can be expressed by transition words, as shown in this example.

Because Hitler failed to respond to the British ultimatum, France and the UK declared war on Germany. Although it was an outcome the Allies had hoped to avoid, they were prepared to back up their ultimatum in order to combat the existential threat posed by the Third Reich.

Transition sentences may be included to transition between different paragraphs or sections of an essay. A good transition sentence moves the reader on to the next topic while indicating how it relates to the previous one.

… Distance learning, then, seems to improve accessibility in some ways while representing a step backwards in others.

However , considering the issue of personal interaction among students presents a different picture.

If you want to know more about AI tools , college essays , or fallacies make sure to check out some of our other articles with explanations and examples or go directly to our tools!

Ad hominem fallacy
Post hoc fallacy
Appeal to authority fallacy
False cause fallacy
Sunk cost fallacy

College essays

Choosing Essay Topic
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College Essay Format & Structure
Comparing and Contrasting in an Essay

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The structure of an essay is divided into an introduction that presents your topic and thesis statement , a body containing your in-depth analysis and arguments, and a conclusion wrapping up your ideas.

The structure of the body is flexible, but you should always spend some time thinking about how you can organize your essay to best serve your ideas.

An essay isn’t just a loose collection of facts and ideas. Instead, it should be centered on an overarching argument (summarized in your thesis statement ) that every part of the essay relates to.

The way you structure your essay is crucial to presenting your argument coherently. A well-structured essay helps your reader follow the logic of your ideas and understand your overall point.

Comparisons in essays are generally structured in one of two ways:

The alternating method, where you compare your subjects side by side according to one specific aspect at a time.
The block method, where you cover each subject separately in its entirety.

It’s also possible to combine both methods, for example by writing a full paragraph on each of your topics and then a final paragraph contrasting the two according to a specific metric.

You should try to follow your outline as you write your essay . However, if your ideas change or it becomes clear that your structure could be better, it’s okay to depart from your essay outline . Just make sure you know why you’re doing so.

Cite this Scribbr article

If you want to cite this source, you can copy and paste the citation or click the “Cite this Scribbr article” button to automatically add the citation to our free Citation Generator.

Caulfield, J. (2023, July 23). How to Structure an Essay | Tips & Templates. Scribbr. Retrieved April 2, 2024, from https://www.scribbr.com/academic-essay/essay-structure/

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Essay Database >
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Essay on Business

Free Partnerships Essay Example

Type of paper: Essay

Topic: Business , Partnership , Members , Company , Community , Easy , Agreement , Starting

Published: 03/08/2023

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Partnerships

Our small business needs to consider the requirements of starting a partnership group by taking into consideration our goals and objectives in the business and where to obtain the financial requirements and planning. All members need to sign a Legal Partnership Agreement Act of 1895 in accordance with law and follow the policies in it as liability is unlimited for each partner. WE will also discuss on the amount of tax contributions that every partner should contribute (SBDC, 2015 p. 1). In as much as there exists two types of partnership namely general and limited partnership for our enterprise we will operate under a general one because are going to participate in the daily activities. We will also be liable for all business debts and active participation of all partners. To start our business we will have to register our company’s name, location, employment status of every member and ever members’ official names given in the partnership agreement form and returned to the Secretary of State’s Office when duly filled and signed for verification (SBA n.d, p. 1). After registration, we will have to obtain a license and business permits from the local authority before we start doing our core activities for the business to run smoothly. Our business being a small one only ten members are required as this is manageable and easy to coordinate. Advantages that we will have over our firm includes. First, it is easy to start and less expensive, the few members available makes easier to begin as more concentration will be revising the partnership, procedural agreement act and following the rules to avoid its termination before the operation period ends. Another reason is that all financial commitments are shared equally among the members as we will be working towards achieving a common goal which is profit maximization. Thirdly is complementary skills applied by everyone to perform a given task through this group members will specialize in the section with which he or she can put all the skills to achieve a quality outcome of our products and sell them to the customers. Creating a competitive advantage in the market. Some of the disadvantages are one if losses are incurred all the members will share the liability equally, and our assets used to settle the pending debts available with or without our acceptability. Secondly, is disagreement among the group partners in terms efforts when a meeting is held leading to slow decision making. Lastly, if one of our partners will want to resign from the group it will have to be dissolved and a new one formed with the present members who are another burden to the company and requires a lot of time to restructure (Adrian, 2010 p. 1). In conclusion, for any new business formation of a partnership is best as capital will be easy to raise through the contribution of every member. Further, if we have a good contribution, banks can also offer us emergency loans payable within one year to help us start our business payable with interest. When we work together as a team realization of our achievements will be easy as our target in the firm will be to satisfy our customers and be the best company producing food stuff in the town market through our quality goods and efforts to reach our target as a partnership.

Adrian. 2010. Advantages and Disadvantages of Partnership. 1 March. [online]. Available at: < http://blog.thecompanywarehouse.co.uk/2010/03/01/advantages-and-disadvantages-of- partnership> [accessed 10 April, 2015] Small Business Administration (SBA) (n.d). Starting and Managing. [online]. Available at: <https://www.sba.gov/starting-business/choose-your-business-structure/partnership> Small Business Development Corporation (SBDC). 2015. Partnership. [online]. Available at: <https://www.smallbusiness.wa.gov.au/business-topics/planning- structures/business- structures/partnership/> [accessed 10 April 2016]

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4 Types of Business Structures — and Their Tax Implications

When starting, a new business must select a business structure, which will have both legal and tax implications. And, the choice of business structure is a monumental step for a new company. It can affect ongoing costs, liability and how your business team can be configured. This topic becomes particularly timely during tax season, as your business’ structure has direct tax implications.

Have no fear: Below, we outline the most common types of business structures and their respective tax ramifications.

What Is a Business Structure?

A business structure is a type of legal organization of a business. When starting a new business, it’s important to take time to decide on the right type of business entity. The business structure you choose doesn’t have a lot of impact on the day-to-day operation of your business, but it is extremely important in defining ownership, limiting personal liability, managing business taxes, and preparing for future growth.

At a basic level, business entities establish the business as a legal entity that can have bank accounts, enter into contracts, and conduct business without putting everything in your own name. For some very small businesses, working under your own name may be okay, but if you plan to earn a full-time income from the business, sign contracts, or hire employees, it’s likely in your best interest to choose a business structure and register with your state.

Key Takeaways

A business structure is a form of legal organization for a business.
The right business structure may offer personal liability protection and other benefits.
Most businesses should choose a business structure and register with their state.
There are unique pros and cons of each type of business structures for every business.

Business Structures Explained

If you’ve ever had a job, rented a home, or bought a car, you likely signed a contract where you were acting as yourself. However, on the other side of the contract, the signature lines may show someone signing on behalf of a business. For that business to enter into a contract, it must use a recognized business structure and maintain an active registration with the state government.

When you sign a contract or do business as yourself, which is the default if you start a business and don’t register, you are personally liable for anything that goes wrong. If you make a mistake with a client or someone is injured by your product or service, you could be personally liable for any financial damages. That means they can sue you and go after your personal bank accounts, investments, home, and other assets in the suit. When you operate a registered business and follow best practices, your personal assets are protected.

By default, your business is considered a sole proprietorship, where you are the business and transact under your own name. When you create an LLC, corporation, or partnership, that new entity takes your place on contracts. Once you reach a certain income level, if you’re running the business full-time, there are additional tax benefits as well.

However, business entities are not free. Every state requires different fees to start and maintain a business. You may be able to file the registration paperwork on your own, but many people choose to hire a lawyer to ensure the business is created correctly and stays in compliance with local, state, and federal laws. Because every business and business owner is unique, it may be worthwhile to consult with a legal or tax professional for advice on choosing the best business structure for your long-term goals.

What Are the Four Types of Business Structures?

1. sole proprietorship.

A sole proprietorship is the most common type of business structure. As defined by the IRS (opens in new tab) , a sole proprietor “is someone who owns an unincorporated business by himself or herself.” The key advantage in a sole proprietorship lies in its simplicity. Here, there is no distinction between the business and the individual who owns it — which means that the owner is entitled to all profits. However, it also means that the sole proprietor is responsible for all the business’s debts, losses and liabilities. This means that creditors or lawsuit claimants may have access to the business owner’s personal accounts and assets if the business accounts cannot cover the debt. Examples of sole proprietorship include freelance writers, independent consultants, tutors and caterers.

Overview of liabilities

Liabilities are defined as a company’s financial debts or obligations that arise during business operations.

Limited liability is a type of legal structure where a corporate loss will not exceed the amount invested in a partnership or LLC. In other words, investors’ and owners’ private assets are not at risk if the company fails. So, if a company with limited liability is sued, then the claimants are suing the company; personal assets can’t be touched.

Whereas personal liability is when a business owner’s assets can be used to satisfy any business debts.

However, "piercing the corporate veil" is the most common in close corporations to settle debts and can occur when serious misconduct takes place. This is when courts put aside limited liability and hold a company’s shareholders personally liable for the corporation’s actions or debts.

Pass-through entity

In terms of tax implications, sole proprietorships are considered a “pass-through entity.” Also known as a “flow-through entity” or “fiscally transparent entity,” this means that the business itself pays no taxes. Instead, taxes are “passed through” to the owner. Pass-through entities are not subject to corporate income tax. Profits pass through to owners who pay them in their personal returns under ordinary income tax rates on the typical Tax Day, usually April 15.

No cost to start — You are a sole proprietor by default.
Easy to maintain — There are no ongoing registration or legal requirements to start, maintain, or shut down a sole proprietorship.
Personal liability: You are personally liable for anything that goes wrong related to the business.
No tax benefits: You must pay self-employment tax on all earnings and include business earnings on your personal tax return using Schedule C.
Less professional: Clients and customers may find you to be unprofessional unless you operate a legally registered business. You may also struggle to get business financing.

2. Partnership

In business structure, a partnership is (opens in new tab) “the relationship existing between two or more persons who join to carry on a trade or business.” Partnerships have three common types of classifications: a general partnership (opens in new tab) , limited partnership (opens in new tab) or a limited liability partnership (opens in new tab) .

General partnership: Consists of two or more partners who share all liability and responsibility equally. This means the partners both take part in the day-to-day operations of the business. It also means that the partners are equally liable for any debts generated by the business. All partners are considered “general partners.”
Limited partnership (LP): Has at least one “general partner” and one “limited partner.” A general partner assumes ownership of the business operations and unlimited liability. A limited partner, also known as a silent partner, invests capital in the business. However, limited partners are not involved in the day-to-day operations and don’t have voting rights (opens in new tab) and therefore have limited liability.
Limited liability partnership (LLP): In this arrangement, all partners have limited personal liability, which means they are not liable for wrongdoings (i.e. acts of malpractice or negligence) committed by other partners. All partners in an LLP can be involved in the management of the business. It tends to be more flexible than the previous partnership forms because partners can determine their own management structure.

Like a sole proprietorship, partnerships are considered a pass-through entity when it comes to taxation. In many ways, a partnership is like an expanded sole proprietorship — but with the advantages and disadvantages that comes with a partner. A partner can provide expertise, skills and capital for the business. But while they can affect the business positively, they can also impact it negatively. You should be comfortable with whomever you enter into business with.

Partnership tax returns are due the fifteenth day of the third month after the end of the entity’s tax year, which is typically March 15 (or March 16 in 2020). However, while the taxes are filed in March, partners don’t tend to pay taxes on the business until the April deadline (July 15 in 2020) since it passes through to their personal tax return.

Relatively easy to create: Creating a partnership with your state is a relatively simple process.
May offer liability protections: Limited Partnerships and Limited Liability Partnerships may offer personal financial and legal liability protection.
May not protect from all liabilities: Partnerships may not shield all personal liability depending on the specific business structure and operations.
More complex tax requirements: Partnerships must file their own tax returns and supply additional forms to partners for personal taxes.

3. Limited liability company

Now, a limited liability company (LLC) is where things start to get a little dicey. The IRS states that an LLC is a “business structure allowed by state statute.” That means it is formed under state law and the regulations surrounding LLCs vary from state to state. Depending on elections made by the LLC and its characteristics, the IRS will treat an LLC as either a corporation, partnership or as part of the LLC’s owner’s tax return (i.e. a “ disregarded entity (opens in new tab) ” with many of the characteristics of a sole proprietorship).

An LLC is considered a hybrid legal entity because it has traits of numerous other business structures, depending on the elections made by the owners. This lends it more protections and flexibility than some of its business structure counterparts. From a protections perspective, members of an LLC are not personally liable. Because the LLC is an entity created by state statute, it has flexibility in regards to federal tax treatment. For instance, a single-member LLC (opens in new tab) can be taxed as a sole proprietorship or a corporation. A multi-member LLC (opens in new tab) can be taxed as a partnership or a corporation.

The aforementioned flexibility causes some discrepancies when it comes to the federal tax due date.

An LLC that chooses to be viewed federally as a sole proprietorship or C corporation (find more on C corporations types below) will typically have a federal tax filing and payment due date of April 15.
However, an LLC being taxed as an S corporation or partnership will typically have a federal tax filing due date of March 15 and a payment deadline in line with their individual income return.
Liability protection for one or more owners: When established and operated correctly, an LLC offers liability protection for owners, including a single owner.
Choose between two taxation methods: Choose between pass-through taxation or S Corp taxation depending on which is more beneficial to owner finances.
Potential for major tax savings: Owners who work in the business full-time may save on self-employment taxes with S Corp taxation.
Costs to establish and maintain: LLCs require government forms and fees to establish and maintain.
More complex tax requirements: Tax preparation may be more complex, particularly if you opt for S Corp taxation.

4. Corporation

Corporations are a company or group of people authorized to act as a single legal entity. This means that the company is considered separate and distinct from its owners (i.e. there’s no personal liability here). However, a corporation is eligible for many of the rights that individuals possess, hence why it is sometimes referred to as a “legal person.” (opens in new tab) For instance, a corporation can sue or be sued, enter into contracts and is entitled to free speech.

The IRS splits corporations into two separate classifications: the “C corporation” and the “S corporation.”

C corporation (C corp): A C corporation is considered the default designation for corporations. All corporations start in the “C” classification when filing articles of incorporation with the state’s business filing agency. Unlike our preceding business structures, C corporations are not a pass-through entity. They are taxed twice at a corporate and personal income level, which is referred to as double taxation.
S corporation (S corp): An S corporation is distinctively different from a C corporation because it is a pass-through entity, allowing it to avoid double taxation. However, the IRS institutes strict standards (opens in new tab) for companies looking to qualify for S corporation status, particularly around shareholders. For instance, an S corporation can only have 100 shareholders, and they must be U.S. citizens/residents. (It’s not unusual for startups to issue 100,000 shares of stock (opens in new tab) at their outset.)

Like partnerships, an S corporation must always file its annual federal tax return by the fifteenth day of the third month following the end of the tax year, generally March 15. The income is then passed down to its members individual returns, which adhere to the normal April Tax Day.

Corporations are the only business tax structure allowing for perpetual existence. This means that its continuance is not affected by the coming and going of shareholders, officers and directors.

Extensive liability protections: S Corp and C Corp owners are shareholders and receive more extensive legal protection if the business operates correctly.
Corporation acts as a legal person: The corporation can enter contracts and transact as its own legal entity.
Can have unlimited shareholders: S Corporations may have up to 100 shareholders. C Corporations can have unlimited shareholders.
More costly to establish and maintain: Corporations typically require more work and higher fees to establish and maintain.
Detailed ongoing requirements: Corporations have requirements such as annual meetings, appointing a board of directors, and other state-imposed regulations.

What Are the Tax Pros and Cons of Each Business Structure?

Choosing a business structure.

The best business structure for your company depends on your long-term goals, ownership, plans to hire employees, and legal risk. While some very small businesses and side hustles may operate safely as a sole proprietorship, most businesses are better off registering a business with their state.

The best business structure for businesses that don’t plan to bring in outside investments is often an LLC, as it works for one or more owners with lower startup and maintenance requirements than a full corporation. If your business employs one or more owner full-time, it could make sense to register as an LLC and opt for taxation as an S Corporation.

If you plan to bring in outside investment rounds and may grow into a publicly traded company in the future, the best business structure is a C Corporation, as that structure allows for 100 or more shareholders.

Because of the important tax and legal implications, it’s often well worth the cost to consult with an attorney or tax expert for advice on the best business structure for your needs and goals.

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Guest Essay

I Hope to Repeal an Arcane Law That Could Be Misused to Ban Abortion Nationwide

A photo illustration shows a pill against a white background with a red circle hovering over it.

By Tina Smith

Ms. Smith is a Democratic senator from Minnesota and a former Planned Parenthood executive.

A long discredited, arcane 150-year-old law is back in the news in 2024, and that should terrify anyone who supports reproductive freedom. Last week at the Supreme Court, the Comstock Act of 1873 was referenced on three separate occasions during oral arguments in a case dealing with access to mifepristone, one of two drugs typically used in medication abortions.

Anti-abortion activists like to bring up the Comstock Act because one of its clauses prohibits sending through the mail “every article, instrument, substance, drug, medicine or thing” that could possibly lead to an abortion. Even if the Supreme Court doesn’t take the bait, a newly re-elected President Trump could order his Department of Justice to start interpreting that line to mean that it is illegal to mail mifepristone — a safe, effective, Food and Drug Administration-approved drug — to doctors and pharmacies, as well as to patients directly. The same could go for medical supplies that are used in performing surgical abortions. That could effectively make abortion impossible to access even in places like Minnesota, which has affirmatively protected a woman’s right to choose by passing reproductive freedom laws.

In response, I’m prepared to fight back — including by introducing legislation to take away the Comstock Act as a tool to limit reproductive freedom.

Let me take a step back and explain how ridiculous it is that we’re even talking about this legislative relic today. The Comstock Act hasn’t been broadly enforced since the 1930s. The Biden administration considers it utterly irrelevant. Many legal experts consider it dead letter law. And once you know its back story, it becomes clear why no one has paid much attention to it in nearly a century.

Back in the 1860s, a former Civil War soldier from rural Connecticut named Anthony Comstock moved to New York City for work. He was shocked and appalled by what he found. Advertisements for contraception! Open discussions of sexual health! It all struck Comstock as terribly lewd and anti-Christian.

So he made it his mission to clean up society, creating the loftily named New York Society for the Suppression of Vice and gathering evidence for police raids on places that distributed material he thought was obscene or promoted indecent living. In the early 1870s he took his crusade to Washington, lobbying for federal legislation that would empower the post office to search for and seize anything in the mail that met Comstock’s criteria for being “obscene,” “lewd” or just plain “filthy.” Morality, as determined by Comstock, would be the law of the land, and Comstock himself would be its enforcer, appointed by Congress as a special agent of the post office.

In a fit of Victorian puritanism, Congress passed the Comstock Act into law. But it quickly became apparent that Comstock’s criteria were unworkably vague. In its broad wording, the law not only made it illegal to send pornography through the mail, it also outlawed the sending of medical textbooks for their depictions of the human body, personal love letters that hinted at physical as well as romantic relationships, and even news stories.

The whole thing was very silly and impracticable, and that’s why the Comstock Act was relegated to the dustbin of history.

But conservative activists recently revived it from obscurity as part of their playbook for a potential second Trump term: The 887-page plan nicknamed Project 2025 being promoted by groups like the Heritage Foundation explicitly calls for a newly elected second-term President Trump to use this zombie law to severely ratchet back abortion access in America without congressional action.

Legislation to repeal Comstock could take many forms, and we need to do it the right way. That’s why I’ve begun reaching out to my colleagues in the House of Representatives and the Senate to build support and see what legislation to repeal the Comstock Act might look like. Anti-abortion extremists will continue to exploit any avenue they can find to get the national ban they champion, and I want to make sure my bill shuts down every one of those avenues. Once the Supreme Court has had its say (and many legal analysts speculate that the mifepristone case heard last week should be thrown out on procedural grounds, and may well be), I’ll be ready to have mine.

Here’s the bottom line: We can’t let anyone — not the Supreme Court, not Donald Trump and certainly not a random busybody from the 19th century — take away Americans’ right to access medication abortion. We must protect the ability of doctors, pharmacies and patients to receive in the mail the supplies they need to exercise their right to reproductive care.

As the only former Planned Parenthood executive serving in the Senate, I feel I have a special responsibility to protect not just abortion rights but also abortion access.

Very few Republicans will admit to wanting to see a total, no-exceptions ban on abortion in all 50 states, but the Comstock Act could allow them to achieve that in effect, if not in so many words.

Americans deserve better. The Constitution demands better. And common sense dictates that we stop this outrageous backdoor ploy to eliminate abortion access in its tracks.

Tina Smith is a Democratic senator from Minnesota and a former Planned Parenthood executive.

The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips . And here’s our email: [email protected] .

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Different Types Of Partnership: [Essay Example], 701 words
Capital - If there are more number of partners they can invest more capital to the business. Flexible - Partnership businesses are easier to form and easier to run. Owners can decide the way that how the business should run. Easy to make Decisions - Partners can easily take decisions according to the situation of the business.
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The partnership, as a whole, files an information-only return on Form 1065, and the individual partners receive a Schedule K-1 showing the share of the partnership profits or losses for the year. The Schedule K-1 is included in each partner's personal tax return, so each partner pays income tax on their share of the net income of the partnership.
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Partnership Defined:

Features of Partnership:

(i) Agreement:

(ii) Two or More Persons:

(iii) Lawful Business:

(iv) Sharing of Profits:

(v) Mutual Agency:

(vi) Unlimited Liability:

(vii) Ownership and Control Jointly Held:

(viii) Non-Transferability of Share:

(ix) Registration not Compulsory:

Advantages of Partnership:

(i) Ease of Formation:

(ii) Large Financial Resources:

(iii) Balanced Decision-Making:

(iv) Incentive to Work Hard:

(v) Ensures Status to all Partners:

(vi) Secrecy of Business Affairs Maintained:

(vii) Divided Risk:

(viii) Advantage of Partners’ Specialisation:

(ix) Flexibility of Operations:

Limitations of Partnership:

(i) Unlimited Liability:

(ii) Uncertainty of Existence:

(iii) Delayed Decision-Making:

(iv) Risk of Implied Authority of Partners:

(v) Fear of Competitive Business:

(vi) Unsuitable for Big Ventures:

(vii) Non-Transferability of Ownership:

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What Is a Partnership?

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Partnership: Definition, How It Works, Taxation, and Types

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Types of Partnerships

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Limited Partnership

Taxes and Partnerships

Advantages and Disadvantages of Partnerships

Pros and Cons of Partnership

How Does a Partnership Differ From Other Forms of Business Organization?

If Partners Don't Have Limited Liability Why Set Up a Partnership?

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Do Partnerships Pay Taxes?

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