Question

Explain the differences among different types of partnerships

Answer 1

There are two major types of partnership namely;

1. General partnership

2. Limited partnership

• In general partnerships all partners bear unlimited liability. Partners are perrsonally liable for the acts of the firm and other partners.While in limited partnerships partners' liability is limited to their investment in firm only.However in limited partnerrships also at least one partner has to bear the unlimited liability.Otherr partners in this type of partnership are silent partners.
• InG.P.( General partnerships) management of firm is done by all members. While in L.P. (limited partnerships) silent partners don't take part in management of the firm.
• In G.P. personal assets of all partners are considered to be the assets of business. While in L.P. perrsonal assets of partners can not be used to satisfy business debts and liabilities.
• Risk to the partners is higher in case of G.P. than L.P.
• G.P. is formed for true business and usually long term in nature. While L.P. are generally created for special situation or venture and are of short term nature.
• G.P. are easier to create than L.P. as fewer legal formalities.
• ongoing costs are also lower in case of G.P. than in L.P.