4 Business Entities That Your Florida Partnership Should Consider

4 Business Entities That Your Florida Partnership Should Consider

A partnership is exactly what it sounds like – a business owned by two or more people who share in the business’s profits, losses, and responsibilities. Each partner typically commits to participating in the business as a whole rather than their own segment of the company. There are a few different business entities available to partnerships in Florida. The best choice for yours will depend on your needs and aspirations.

General Partnerships

A general partnership is the default status of a Florida partnership. All involved are equal partners unless a formal written agreement states otherwise. Everyone has the same authority, the same input in the decision-making process, and the same share of profits and losses. However, this equality also applies to liability. This means that all partners’ assets will be at risk should the company take on substantial debt. Each partner can be held liable for the torts, negligence, or other wrong-doings of another partner, too.

Limited Partnerships

Composed of one or more general partners and one or more limited partners, this business entity has more restrictions than general partnerships. Operations are not equitable. General partners handle the company’s management exclusively. The limited partners don’t have any say in the matter, which is why they are sometimes known as “silent partners.” Their sole obligation is to contribute financially towards the partnership.

The other major difference to be aware of has to do with liability. Limited partners are only held liable to their own capital contributions if the business takes on debts or faces litigation. The general partners enjoy no such protection. This makes limited partnerships ideal for situations where the partners are looking to invest in the business but hope to avoid any burdens of liability.

Limited Liability Partnerships

A limited liability partnership (LLP) is like a combination of a limited liability company and a partnership, although it has more in common with the former. This business entity benefits from similar debt and liability protections as a corporation or a limited liability company (LLC) would while still enjoying the often-favorable tax structure of a general partnership. The LLP offers its owners the same freedoms with daily operations that a general partnership would as well.

Unlike a general partnership, however, each partner in an LLP is solely responsible for his or her own debts or negligence. It’s also worth noting that the IRS does not consider an LLP to be a standard partnership. Instead, it takes advantage of “pass-through taxation.” Pass-through taxation is the practice of “passing through” a business’s profits on to the partner’s tax returns.

Partnership vs. LLC

With more entrepreneurs electing to structure their businesses as limited liability companies than ever before, it’s important to understand how LLCs stack up against partnerships to ensure that you’re choosing the best business entity possible. An LLC’s liability protections are significantly stronger than a partnership’s. They are more flexible when it comes to management, too.

Even limited partnerships, for example, need at least one general partner for absorbing liability. Partners must also take an active role in daily business operations. LLCs have neither of these requirements but are more difficult and expensive to form than a partnership.

More on the benefits of LLCs can be found here.

But that’s not all. A successful business partnership requires more than just the right business entity. That’s why we put together a blog on what makes for successful business partners here, with evidence taken from success stories like Ben and Jerry’s!

Looking to start a business or grow your current business? Still unsure which business entity is best for you? Contact FL Patel Law today by visiting our website or calling 727-279-5037.