It is quite common for two or more people to invest in a business together. Over the years, the types of partnerships people engage in have changed drastically. If you are planning on a joint venture, there are a few things you need to keep in mind. And, this post focuses on different types of partnerships.
In any kind of partnership, it is important for the partners to invest or “buy in”. The rate at which profits and losses are shared depends on the initial investment.
General partnerships
As suggested by its name, this partnership involves general partners. It is the responsibility of each partner to engage in active decision-making. And, each member has the freedom to sign deals or contract papers. For a major decision to be executed, all the general partners should agree. Since each member is actively involved in the decisions, debts, and liabilities will be incurred by all.
Limited partnerships
By definition, limited partnerships are a combination of both general and limited partners. In most cases, there will be a single general partner and multiple limited partners. Limited partners don’t need to be a part of every decision. They can choose to miss management decisions too! Their debts and liabilities depend on the investment made.
Limited liability partnerships
Limited liability partnerships are quite different from the limited partnership. It is closely related to the rules and regulations of a Limited Liability Company. Each and every member of the company are limited partner. These companies are often created when a group of professionals wants to share their resources and start a firm. The qualities of corporations and partnerships will be seen in these companies. For instance, every member has limited liability for errors, incompetence, and omissions. Even if a partner is involved in malpractice, the rest will not be affected legally.
Joint Ventures
This is a unique kind of partnership. The idea holds good for small businesses. Joint ventures are used to combine two different businesses for a specific reason. Many a time, the joint ventures work together for a predefined duration.
Qualified joint ventures
Finally, you have qualified joint ventures that involve spouses. The primary aim of this system is to avoid complicated tax return procedures. Spouses can file their taxes separately. The taxes filed by each spouse will be combined as a part of the joint venture. When used correctly, qualified joint ventures will make the entire tax process simpler.
