A Little About the
Partnerships include general partnerships (in which there is no limited liability protection and all partners are individually liable for all partnership liabilities) and limited partnerships (in which there is limited liability protection for limited partners, but not for general partners). Partnership profits are not taxed at the entity level, but rather profits are “passed-thru” and taxed only once at the partner level. Limited partners may not be involved in management if they wish to preserve their limited liability protection. Limited partnerships have been common structures in real estate or similar projects.
- Limited partnerships provide limited liability protection to their limited partners. General partnerships, and general partners in limited partnerships, have no limited liability protection and are liable for all partnership liabilities. Limited partner liability is limited to their investment in the entity. (LLC’s, s Corporations and C Corporations provide similar limited partner protection. Proprietorships and general partnerships do not.)
- Partnerships S Corporations are owned by partners and managed by general partners. LLC’s offer more flexibility in these areas than corporations and partnerships.
- Partners may number a minimum of 2 and there is no maximum limit. General partners and limited partners Shareholders may include individuals, LLC’s, partnerships, corporations, trusts, etc., any or all of which may include resident or foreign individuals or entities. (LLC’s, C Corporations and partnerships offer more flexibility. Proprietorships and S Corporations do not.)
- Partner interests may include different classes, voting rights, capital or profits interests, etc. offering a wide range of flexibility. Limited partners are the only partners with limited liability protection. (LLC’s, C Corporations and partnerships offer more flexibility. Proprietorships and S Corporations do not.)
- Partnerships are managed by general partners. Limited partners may not be involved in management if they wish to preserve their limited liability protection. General partners are liable for all of the partnership’s liabilities. General partners are protected by the “business judgment rule” against fellow partners for decisions made in good faith, but may be individually liable to fellow partners for gross negligence or willful misconduct in their actions as general partners. (Partnerships may consider the appointment of entities, not individuals, to serve in general partner roles and/or the procurement of directors and officers insurance coverage in order to provide additional protection to general partners against individual liabilities.)
- Partnership profits are not taxed at the entity level, but rather profits are “passed-thru” and taxed only once at the partner level. Revenues and expenses are reported (not taxed) at the entity level through Form 1065 and passed through by Form 1065-K-1’s and taxed at the partner level on Form 1040, Schedule E.
- For any entity offering an investment opportunity to more than 1 investor, federal and/or state securities laws may apply and may require certain disclosures or registrations in connection with such an offering. Please consult a licensed attorney for advice concerning your specific circumstances.