What is a Business Partnership?
A business partnership is a legal agreement where two or more entities share ownership and operations of a business. It can exist between businesses, individuals, or any number of parties. The definition of an HR business partner can be found here: HR Business Partner.
How is a Business Partnership Established?
A verbal agreement between business partners may precede the establishment of a business partnership. The agreement is then formalized through a written document that outlines the type of partnership and the details of the arrangement. All parties involved must sign the document.
What are the Types of Business Partnerships?
There are three main types of business partnerships:
General Partnership: This is the simplest form of partnership and involves two or more people who own and operate a business together. In a general partnership, each partner is responsible for the company’s debts and liabilities. Profits and losses are shared equally among the partners, unless otherwise specified in a partnership agreement.
Limited Partnership: This type of partnership involves two types of partners: general partners and limited partners. The general partners are responsible for managing the business and are personally liable for the company’s debts and liabilities. The limited partners, on the other hand, are passive investors who contribute capital to the business but do not participate in the management of the company. Limited partners have limited liability and are only responsible for the amount of money they invested in the business.
Limited Liability Partnership (LLP): An LLP is similar to a general partnership, but each partner has limited liability. This means that each partner is not personally responsible for the debts and liabilities of the business. Instead, each partner is only responsible for the debts and liabilities they incur through their own actions or decisions. LLPs are commonly used by professional service firms, such as law firms and accounting firms.
What’s the Difference Between a Business Partner and a Shareholder?
While both business partners and shareholders possess some ownership in a business, a business partner’s shares arise from an agreement with other business partners and usually entail a level of control over the business’s operations. Shareholders, on the other hand, own shares of a publicly traded business, entitling them to vote on significant business issues, but with limited participation based on their share ownership. Shareholders are not responsible for any unlawful activity by the business or its partners, as they only stand to gain or lose money based on the business’s success.