The Traditional Business Entity: The PartnershipThe Partnership is a separate entity unto itself. Deriving its authority from both common law (de facto partnership) and state statutes, the Partnership is a traditional business entity controlled and operated by two or more persons with the common interest to transact business together for profit. It has the power to do things that an individual can do, such as purchase land and enter into contracts, and even has its own federal identification number, similar to an individual having a social security number. There are two main, distinctive types of Partnerships, General Partnerships (GP) and Limited Partnerships (LP). In General Partnerships, the partners typically share in not only the profits of the Partnership but also its debts and obligations. In a LP, there are two types of partners, a 'general partner' and 'limited partner(s)'. The general partner in a LP, which can be an entity, takes on the debts and liabilities of the Partnership while the limited partner(s) are only liable for up to their initial contribution (investment) into the LP.
Consequently, LPs are generally more advantageous to form over a GP as it allows the majority of its partners to receive the benefit of liability protection, allowing its limited partners the ability to shield their personal assets and, in most circumstances, from business creditors and individuals (or other business entities) who seek remedies stemming from the negligence or wrongdoings of the Partnership. This protection, however, may be pierced ("Piercing the Veil") if the Limited Partnership does not take the necessary steps to ensure that the entity is separate from its limited partners and that the general partner, if an entity, is adequately capitalized. Consequently, it is important to speak to a skilled business attorney who can advise you on how to maintain your company's liability protection.
Organization of a Virginia PartnershipIn the Commonwealth of Virginia, a Partnership is organized under Virginia Statutes §50-73.79 et seq. for Partnerships (the "Virginia Uniform Partnership Act") and §50-73.1 et seq. for Limited Partnerships (the "Virginia Revised Uniform Limited Partnership Act"). Today, however, with the introduction of the more popular and fluid Limited Liability Company, Partnerships have lost most of their allure and are not as often the best choice when selecting a business entity.
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