Cons of general partnership:

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Instability upon partner exit. The departure or death of a partner can dissolve the partnership. If one of the partners in a law firm exits the business, the firm may need to be re-established under a new agreement.
Joint and several Liability. All partners share responsibility for the business’s debts and legal issues. In a construction partnership, if one partner incurs a debt, all partners might be held accountable.
Shared liability for partners’ actions. Each partner is liable for the actions of their co-partners. For example, if one partner in a consultancy firm engages in malpractice, all partners may face legal repercussions.
Personal asset risk. Partners’ personal assets, such as homes and savings, could be at laos rcs data risk in the event of the business accruing debts or facing lawsuits. This lack of protection is a significant drawback compared to LLCs or corporations.
3. Limited Partnership (LP)
Limited Partnerships (LPs) share similarities with General Partnerships, such as being owned by two or more individuals and benefiting from pass-through taxation, meaning the business itself isn’t taxed; instead, profits and losses pass through to the partners’ personal tax returns.

The pivotal distinction lies in the role of limited partners. Unlike in GPs, where all partners share equal liability, limited partners in an LP enjoy protection from the business’s debts beyond their investment amount.

Consider the case of a boutique design firm, where one partner handles creative direction while the other manages finances. If structured as an LP, the financial partner could be a limited partner, minimizing liability in case of legal issues related to design decisions.