General Partnership (GP)

A general partnership is the simplest multi-owner business structure.

Key Features

• Ownership: Two or more partners.
  
  

• Liability:
  
  

  • Unlimited personal liability for all partners.
    
    

  • Each partner is responsible for the debts, obligations, and legal actions of the business.
    
    

  • Partners are also liable for actions of other partners (“joint & several liability”).
    
    

• Management:
  
  

  • All partners can participate in management by default.
    
    

• Formation:
  
  

  • Easy to form, sometimes automatically created if two people do business together.
    
    

• Taxation:
  
  

  • Pass-through taxation (income flows to partners, no entity-level tax).
    
    

When GPs Are Common

• Small businesses, freelancers teaming up, family businesses, informal partnerships.
  
  

2️⃣ Limited Partnership (LP)

A limited partnership has two classes of partners:

1. General Partners
   
   

2. Limited Partners
   
   

General Partners

• Have unlimited personal liability
  
  

• Manage the business
  
  

• Make decisions and control operations
  
  

Limited Partners

• Have limited liability (only up to their investment)
  
  

• Cannot participate in management
  
  

  • If they do, they risk losing limited liability status
    
    

Formation

• Must file state paperwork to form an LP
  
  

• Requires a written partnership agreement
  
  

Taxation

• Pass-through taxation
  
  

• Limited partners typically receive passive income/losses
  
  

When LPs Are Common

• Real estate investment groups
  
  

• Private equity and venture capital funds
  
  

• Film/entertainment projects
  
  

• Any business where passive investors contribute capital but do not manage
  
  

3️⃣ Limited Liability Partnership (LLP)

An LLP is designed to protect partners from liability for actions of other partners.

Key Features

• Liability Protection:
  
  

  • Partners are generally not personally liable for the negligence, malpractice, or misconduct of other partners.
    
    

  • Partners may still be personally liable for their own actions or direct supervision.
    
    

• Management:
  
  

  • All partners may participate in management (unlike LPs where only general partners manage).
    
    

• Formation:
  
  

  • Must register with the state
    
    

  • Often restricted to professional practices (varies by state)
    
    

Common Users of LLPs

• Law firms
  
  

• Accounting firms
  
  

• Medical groups
  
  

• Architecture/engineering firms
  
  

These businesses choose LLPs to prevent one professional’s malpractice from endangering everyone else’s personal assets.

Summary

• General Partnership (GP): Simple, but everyone is personally liable for everything.
  
  

• Limited Partnership (LP): Has general (manage, unlimited liability) and limited (investors, limited liability) partners.
  
  

• Limited Liability Partnership (LLP): All partners get liability protection, especially from other partners’ misconduct, while still being able to manage the business.

📞 Contact Z Tax & Accounting to schedule a consultation today by calling (214) 699-4790. We provide secure, remote tax filing and accounting services for partnerships nationwide and internationally.

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