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What’s the difference between a general and limited partnership?
September 20, 2021
Starting a business on your own can be a daunting prospect, but launching a company with someone else’s support may not seem quite as frightening. When you are the sole proprietor, you are the only one investing money and time in the company. You don’t have anyone else to help you overcome startup challenges or troubleshoot issues as they arise.
A partnership means that you have less personal risk involved in your new business. There’s at least one other person who wants to help start the company. That means another set of hands to do the hard work and another set of eyes reviewing issues. It also means the financial investment required of you is lower.
When negotiating with a potential partner, one of the considerations will be whether you want to enter a general or a limited partnership. What is the main difference between these two business forms?
A limited partner is essentially just an investor
A partnership is a business structure involving two or more people working to create a company together. In a general partnership, all parties contribute financial and practical resources to the company, such as their labor and expertise.
In a limited partnership, at least one of the partners involved in the operation of the business will only be an investor, not someone who will work at the company. A limited partnership can be a great option for those who need financial resources and don’t have much to offer beyond ownership in the business to their investment partners.