Partnerships - LLP Limited Liability General and Business Information
Over the past few years there has been a huge increase in the amount of partnerships formed. Often times these are simple to organize and do not have the double taxation that some corporations do. With their increase in popularity, it is best to be at least somewhat familiar with partnership qualifications.
Setting up one is easier than corporations, but there are still some tricky subjects to deal with. The benefits can be very good, as long as all the reporting requirements are met at tax time, so let us go over some useful partnership information.
Before we get started on generalizations, it is very important to note that there are more than one form of these types of businesses. Actually, there are 3 separate ways to file a partnership, with each having their own advantages and disadvantages. They include a general partnership, limited partnership, and limited liability partnership (LLP).
Instead of going into detail about these just note that before creating your business it is important to meet with a CPA or other professional that can give you advice based on your specific situation. Each is unique so you cannot just go by what others say or what you read about. The CPA will be able to advise you and lead you in the right direction.
With that being said, partnerships are normally formed when two or more people agree to do business together. Then they will set up an agreement on how profits and losses will be shared. The best thing about a partnership is that you do not have to front all the money upfront all by yourself. Perhaps one partner has the money and the other has all the knowledge or connections with people. Often times the best partnerships consist of people with totally different personalities. If people are too much alike, they can often clash and disagree, without being able to work out their problems.
Many times lawyers, tax accountants (CPA's), and doctors form partnerships in order to offset the costs of renting a building and all those related expenses. They also take full advantage of the taxation benefits that come with a partnership as well. While simpler than most corporations, if there are more than 2 or 3 partners the reporting requirements become more and more complex and may require expert knowledge.
In this instance it may be best to contact a professional with a background knowledge about partnership qualifications. Setting up an appointment with a pro should not take more than a few days and in that time you can prepare any questions you may have.
Do not assume you know all about your business just because you set it up a while back and were an expert then. The laws are ever changing and what was law a few years ago may not apply still. Unless you can stay very up to date on the issues, a tax professional may be the way to go.