Diagram of forming a Partnership and Limited Liability Company
A partnership can be formed with usually two to twenty persons who shared a common goal- which is to share profits and losses together. Any partnership more than twenty persons will be treated as a company. An agreement will be discussed and set either in oral or contract form prior to the start of any partnership. A verbally agreement is unsafe as there are no black and white documents that support the agreement in the first place. Therefore, a written agreement is much more advisable. The diagram above shows that there are two different type of partnership. They are the “Limited Partnership” and “Limited Liability Partnership”. A ‘Limited Partnership” consists of one or more general partners and 1 or more limited partners. The limited partners shall not be liable for any debts incurred by their partners and they are limited to the amount of contribution that has been agreed initially. Neither side of the “Limited Partnership” has the power to disband the partnership, unless, one of the partner are dead, bankrupt or dissolution. Also, keep in mind that a “Limited partnership” should not participate in any management activities or they will be deemed as a general partner. Nevertheless, they are able to increase, reduce or draw out their contributions but it is subject to the approval of their general partners.
One of the more favor partnership would be “Limited Liability Partnership”. In “Limited Liability Partnership”, there is no limit to the number of partners and they can be form individually or by merging of corporation. It has a separate legal personality, whereby, the partners and managers are not liable for the debts incurred by the company. They have the power to sue or to be sued and can own property under its own name. One benefit of forming an “LLP” is that each partner will be accessed and taxed individually based on their share of profit. The way they operate is more complex...