Going into business with another person requires a lot of thought and planning. Not only will you potentially be working with this person every day, but you will be making operational and financial decisions with them.
Because there is so much at stake, it is important to carefully consider what type of business relationship to establish. Here are some of the pros and cons of three different kinds of business partnerships.
General partnership
As the default type of business entity, general partnerships are easy to set up. Another advantage is that each employee has equal rights and responsibilities to the business. One disadvantage is that general associations do not offer protection of personal financial assets.
Limited partnership
In a limited partnership, there is one fully responsible person along with limited partners who invest in the company but are not liable for any accrued debts. The advantage of this is that it leaves the limited partners with more assets to put towards the business. One disadvantage is that the limited parties get little say in how to run the company.
Limited liability partnership
One pro of a limited liability partnership is that it operates similarly to a general association, but the partners are not liable for the financial business actions of their colleagues. A con is that regulations vary by state. For example, if you relocate your company, you might need to adhere to different rules than you did in Minnesota.
Think about how you want to operate your business and what each type of partnership will bring before entering into a business agreement.