Compare general, limited, and limited liability partnerships. Formulate reasons as to why a group of prospective partners might choose each.

Answer 1

General Partnership:
- In a general partnership, all partners share equal rights and responsibilities.
- Each partner has unlimited personal liability for the partnership's debts and obligations.
- This type of partnership is typically chosen by individuals who have mutual trust and intend to actively participate in the management and operations of the business.
- It allows partners to have full control and decision-making power in the business.

Limited Partnership:
- A limited partnership consists of at least one general partner and one or more limited partners.
- General partners have unlimited personal liability, similar to a general partnership.
- Limited partners, on the other hand, have limited liability, meaning their personal assets are typically protected in the event of debts or obligations.
- Limited partnerships are often chosen when there is a need for additional capital from passive investors who do not want to be involved in the management of the business.
- General partners in a limited partnership have full control and decision-making authority.

Limited Liability Partnership (LLP):
- LLPs provide limited liability protection to all partners, meaning their personal assets are generally not at risk.
- Unlike general or limited partnerships, partners in LLPs are not personally liable for the actions or debts of other partners.
- This type of partnership is typically chosen by professionals such as lawyers, accountants, or medical practitioners who want to share liability protection while maintaining a cooperative and collaborative working environment.
- LLPs allow partners to have more flexibility in terms of management and decision-making than corporations.

Reasons for Choosing Each Partnership Type:
1. General Partnership: A group of prospective partners might choose a general partnership if they have a high degree of trust and want equal control and involvement in the business. They may also prefer the simplicity and ease of formation, as there are usually no legal formalities required.

2. Limited Partnership: Prospective partners might choose a limited partnership when they require additional capital from passive investors who do not want to be involved in the day-to-day operations. The general partner(s) can use their expertise to manage the business while the limited partners contribute financially.

3. Limited Liability Partnership (LLP): A group of professionals might choose an LLP to share liability protection while maintaining collaborative and cooperative work dynamics. This partnership structure offers flexibility in management and decision-making, making it suitable for professionals who want to work together but still maintain their individual autonomy.