A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.
There are several forms of Partnerships, including:
GENERAL PARTNERSHIP (GP)
Partners are jointly and severally liable for all legal and financial obligations of the partnership and for all wrongful acts of any partner acting in the ordinary course of partnership business. Partnership income is taxed as personal income to the partners.
LIMITED PARTNERSHIP (LP)
A partnership consisting of a general partner, who manages the business and has unlimited personal liability for the debts and obligations of the Limited Partnership, and a limited partner, who has limited liability but cannot participate in management. Liability protection up to the amount of the investment for the company's limited partners. Business profit and loss are "passed through" to the partners for reporting on their personal tax returns.
LIMITED LIABILITY PARTNERSHIP (LLP)
Operates much like a limited partnership, but gives each member protection from personal liability, except to the extent of their investment in the LLP. Passes through its taxation to its partners. A general partner's income is subject to income tax and self-employment tax. A limited partner, however, reports their share as passive income or loss.
LIMITED LIABILITY LIMITED PARTNERSHIP (LLLP)
The LLLP is essentially a limited partnership, but offers limited liability protection for its general partners. LLLPs are most common in the real estate business. Passes through its taxation to its partners. A general partner's income is subject to income tax and self-employment tax. A limited partner, however, reports their share as passive income or loss.