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.