Type of Partnership Firm
Partnership in business term where two or more person will to start a business on profit or loss sharing in certain ratio according to their mutual understanding. General business structures are, Company, sole property, Limited liability partnership ( LLP) etc. In partnership each partner contribute certain capital, idea to promote business, share profit and loss in business, liability arises due to business.
However Partnership liability may reduce by apply limited liability partnership.
There are two type of Partnership Firm
Limited liability partnership
Limited liability partnership
Limited Liability partnership can be made through Registrar of company of respective your arear. Government of India, Ministry of Corporate affairs issued a certificate like company registration certificate. Limited liability partnerships (LLP) retain the tax advantages of the general partnership form, but offer some personal liability protection to the participants. Individual partners in a limited liability partnership are not personally responsible for the wrongful acts of other partners, or for the debts or obligations of the business. Because the LLP form changes some of the fundamental aspects of the traditional partnership, some state tax authorities may subject a limited liability partnership to non-partnership tax rules. The Internal Revenue Service views these businesses as partnerships, however, and allows partners to use the pass through technique.
Any partnerships that wish to take advantage of LLP status do not need to modify their existing partnership agreement, though they may choose to do so. In order to change status, a partnership simply files an application for registration as a limited liability partnership with the appropriate state agency.
General partnership made through a partnership deed on mutual understanding of profit and loss sharing ratio on certain percentage basis. A general partnership involves two or more owners carrying out a business purpose. General partners share equal rights and responsibilities in connection with management of the business, and any individual partner can bind the entire group to a legal obligation. Each individual partner assumes full responsibility for all of the business’s debts and obligations.
A limited partnership allows each partner to restrict his or her personal liability to the amount of his or her business investment. Not every partner can benefit from this limitation — at least one participant must accept general partnership status, exposing himself or herself to full personal liability for the business’s debts and obligations. The general partner retains the right to control the business, while the limited partners does not participate in management decisions.
There are two type of partnership firm
Limited liability partnership it is broad concept and legally it strong in eye of laws. General partnership is less strong in eye of laws because it simply on a deed. So that try to made limited liability partnership firm because such type of firm has limited liability to the extent of firm assets mean firm partners are not liable for firm liability beyond firm assets.