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What are the three types of business partnerships?

| Jul 13, 2021 | Business Formation, Partnership Agreements And Disputes |

Forming a partnership in Texas is a good way to take advantage of pooled strengths among professionals who have a common business interest. It is important to develop a thorough agreement between you and your partners that defines the terms and goals of your relationship along with everyone’s responsibilities.

Types of business partnerships

When you decide to partner with one or more individuals, you have three choices, which affect partnership agreements/disputes in the future. These are general partnership, limited partnership and limited liability partnership. A general partnership is the most common and all partners generally determine how a business’s day-to-day operations will be run. A limited partnership combines a general partner who runs the business, with limited, or silent partners, who contribute financially but are not involved in making decisions. Limited liability partnerships, or LLPs, allow all partners to have liability protection from the actions of the other partners.

Forming a partnership

Creating a business partnership is a relatively easy process, yet you should follow some general guidelines to ensure that the partnership is sound. Selecting the type of partnership you want is crucial for all partnership agreements/disputes. You’ll also need to choose a business name, create the partnership agreement, make sure that you meet all tax and regulatory requirements, obtain insurance and create a bank account for the business. Creating the partnership agreement is the most crucial step, followed by ensuring that you meet all of the legal requirements.

While you can perform many of these tasks independently, consulting an attorney experienced in business law might help ensure that you get things right. By having a legal professional draft your partnership agreement or even modify an existing one, you may possibly avoid future disputes while also ensuring the smooth operation of your business.

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