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Is a limited partnership right for you?

| October 26, 2022 

Small businesses contribute enormously to the economy of Washington state. However, the financial burden of forming a new company prevents many would-be small business owners from launching a startup For potential business owners who need to quickly gain capital for their business, choosing a limited partnership might be the best choice.

Limited partnerships must involve at least two people

A limited partnership is a business agreement between at least two partners. The general partner oversees the company and makes decisions, while the limited partner does not. The limited partner contributes an investment that may be used to begin the business. Liability for the company relies primarily upon the general partner, although the limited partner may be liable for an amount equal to their investment.

Limited partnerships offer advantages for the general owner

A limited partnership provides the following benefits:

  • A limited partnership typically costs less to form than an LLC or corporation.
  • Limited partners may use the company as an investment opportunity.
  • General partners can raise financial backing without relinquishing control of their company.

Limited partners may join in some business tasks

Although the majority of the business must be operated by the general owner, a limited partner may enjoy certain responsibilities. These activities allow limited partners to participate in the business without increasing their liability:

  • Working as a contractor or agent of the company
  • Serving on the board
  • Providing consulting services to the general owner
  • Amending partnership agreement
  • Voting on any fundamental changes to the company

Limited partnerships may create legal challenges

If one of the partners wants to exit the limited partnership or is no longer fulfilling their role, this can present a legally difficult area. One of the best ways to protect you, your investment and your company is to make sure that your limited partnership agreement includes details to ensure a smooth running and dissolution of the company.

Further Reading

LLC operating agreements in Washington

January 18, 2023 
Many small business owners in Washington might be familiar with limited liability companies, also known as LLCs. Setting a business up as an LLC has a lot of financial and legal benefits for business owners that all come down to the operating agreements. What is an LLC operating agreement? The operating agreement essentially outlines the […]

Joint ventures and partnerships

December 9, 2022 
In the business world in Washington state, you sometimes need to collaborate with others to achieve specific goals. Two of these circumstances include the formation of a business partnership and that of a joint venture. However, these two things are not always synonymous. They are, in fact, quite often very distinct and come with different […]
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