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What type of business partnership should you choose?

| Feb 15, 2023 | Partnership Agreements And Disputes, Partnership/Company Agreements And Disputes |

If you are setting up your business in Texas, it might be a good idea to consider establishing a partnership. A partnership is one of the most common business entities. In a partnership, two or more people share ownership of a single business. It’s a great way to grow your business and share responsibilities. Being able to collaborate with others and share ideas is certainly an advantage. Having partners could also ease your financial burden. There are three types of partnerships. There are advantages and drawbacks for each type. It will be up to you to decide what type of partnership would benefit your business.

General partnership

This is the most common type of partnership. This is where two or more people establish a business they manage together. Each individual in the partnership is responsible for all debts and obligations of the business.


1. Easy to establish

2. Simple tax structure

3. No income tax (at the partnership/company level)

4. Easy to dissolve


1. Unlimited liability of each partner

2. Responsible for partners’ debts

3. Disagreements could happen

Limited partnership

A limited partnership has limited partners, and at least one general partner. The limited partners are mainly investors, and do not participate in managing the company. The limited partners’ liability is limited to the amount that they invested.

Advantages of being a limited partner

1. Limited personal liability

2. Only taxed one time

3. Easy to create

4. Informal structure

Disadvantages of being a limited partner:

1. Limited participation in management

2. Ownership is hard to transfer

3. Difficult to change management roles

4. Lose limited liability if they participate in management.

Limited liability partners

In this type of business partnership, individuals have limited liability, but they also can actively participate in the management of the company.


1. Often no liability at all

2. Not responsible for partnership debts

3. Simple taxation

4. Can participate in the management of the company


1. Not allowed in all states

2. Only available for some professions

3. Complex tax filing

No matter what type of business partnership you decide upon, make sure you examine your company’s needs. Do your research, proceed with caution and do what’s best for the success of your business.