Limited Partnership

Limited partnerships have characteristics of both corporations and partnerships.  A limited partnership consists of one or more general partners who actively manage the business and one or more limited partners who, by law, may do little more than invest in it.  Although limited partners have a role similar to that of shareholders, they have considerably less ability to influence business policy.  The general partners function as both the officers and the board of directors, but they have the unlimited liability of partners.  (A general partner may also be a limited partner, but this added status has no effect on liability.)  Limited partnerships tend to be organized to undertake a particular venture, like drilling for oil on a specific leasehold, erecting an office building, or operating a restaurant.  Today, the attractions of limited partnerships for investors center on treatment of this business form as a partnership for tax purposes and as a corporation for liability purposes.  The law applies the aggregate theory to a limited partnership, which means it is treated as a group of individuals, not as an entity like a corporation.  For this reasons, it is the preferred tax shelter vehicle.  Tax benefits, such as credits and depreciation, flow through to the limited partners.  Corporations cannot pass similar benefits onto their shareholders.  Like corporations, limited partnerships can only come into existence by meeting statutory requirements under the Revised Limited Partnership Act.  If these are not observed, a court may find that the partners have formed a general partnership, and the limited partners would lose their limited liability.

Limited Liability Partnership or "LLP"

The Partnership Law provides for the registration as limited liability partnerships of general partnerships that provide professional services. The registration of a LLP under the Partnership Law offers professionals doing business the opportunity to do business in a traditional general partnership form, while at the same time being accorded the liability limitations traditionally accorded to professional corporations under the corporate law.  A partner in a LLP will be liable only for his own professional neglect, wrongful acts or misconduct, or for the neglect, wrongful acts or misconduct of those acting under his direct supervision or control, and he will not be liable, as under the general partnership law, for the debts and obligations of the partnership to the extent that the partnership's assets are inadequate.  Therefore, should a party be injured by the acts of a partner practicing his profession in the LLP format, the partnership's assets and the personal assets of the negligent or supervising partner will be available to pay any liability owed to the injured party, but the personal assets of the other partners will be protected from such liability.

Partnership

A partnership is the relationship existing between two or more persons who join together to carry on a trade or business.  Each partner contributes money, property, labor or skills, and agrees to share in the profits or losses of the business.  Like a sole proprietorship, each of the general partners is personally liable for the obligations of the business, including debts.  It is extremely important that each partner's rights and obligations are outlined in a partnership agreement.  An agreement, although recommended, is not required by law.  If there is no agreement, the NYS Partnership is relatively free of government restrictions and fairly easy to organize.  With more people involved, it probably has more capital, experience and skills to draw upon.  However, like a sole proprietor, each general partner may be held liable for all debts of the business.  When two or more people are involved in key business decisions, it is sometimes hard to reach agreement.  And if you should want to buy out one or more of your partners, it may be difficult unless you arrange for such a provision in your partnership agreement.  You may wish to consult an attorney before entering into the agreement.  To form your partnership, you are required under section 130 of the General Business Law to file a Certificate of Conducting Business as Partners.

Sole Proprietorship

A sole proprietorship is a business that is owned and operated by one person (a sole proprietor).  This is the simplest and most common form of small business organization.   As a sole proprietor, you make the decisions about your business,, and the profits are yours to enjoy.  You are also personally liable for all the debts or your business.  Generally, your business as well as your personal assets are subject to the debts due creditors.  If you plan to conduct a sole proprietorship under a name other than your own, such as a trade name or an assumed name (DBA, "doing business as"), section 130 of the NYS General Business Law requires the filing of a business certificate with the county clerk in the county where your business is located.