Partnerships are among the most important types of business relationships that exist. A partnership is a formal arrangement in which two or more parties, usually known as organizational partners, decide to work together to advance their own mutual interests. The partners in such a partnership can be individuals, companies, industries, interest-based associations, corporations or combinations. A partnership relationship provides an environment where two or more people who share complementary skills and experiences can utilize their individual and collective skills to achieve common goals.
The major purposes for partnerships are to share resources, build joint ventures, meet financial obligations and generate revenues. In a nutshell, partnerships help to increase the net income of a company. The amount of profit that is generated depends on how well the various aspects of the partnership are managed. Some of the major elements that affect the profits of partnerships are collaboration, sharing of risks and venture capital. The profit made by partnerships can be transferred between the various partners or divided amongst the partners to create different forms of dividends. Partnerships also provide work places, proper corporate structure, legal protection and exchange of data and technology.
Most of the partnerships in business entities are limited. This means that only limited parties have access to the profits of the partnership. In most of the cases, the profit made by partnerships is tax-free. However, some of the partnerships in business entities do allow some of the profits to be shared with the partners. This allows the business entities to realize significant cost savings that would not be possible if the firms were sole proprietors.
A majority of the partnerships in business entities are limited liability partnerships (LLPs). An LLC is a type of business partnership that has both limited liability and unlimited liability. Limited liability partnerships (LLPs) are formed through a written contract between the partners, which sets out the various responsibilities and liabilities. An LLC is very similar to the general partnership but provides limited liability and can enjoy more benefits than a general partnership.
A number of businesses utilize the services of an LLC. Many service providers have launched an internet site that facilitates the formation of an LLC. This service enables one to select an LLC based on its location, city and state and pay a simple fee for the registration of the LLC. Once the registration has been processed, the new LLC will become the legal owner of the domain name and website and it will enjoy all the benefits of a general partnership.
An important benefit of an LLC is that it allows limited liability. This means that all the personal income tax liabilities of the general partners will be eliminated. Some countries have recognized an LLC as a separate entity from the general partner. In such a case, the partners actually pay taxes only once. The advantages of these partnerships are very attractive to small business owners.