A Limited Partnership (“LP”) is comprised of one or more general partners and one or more limited partners. LPs are creatures of statute – you must file a form with the state to bring one into being. A LP exists apart from its creators as a distinct legal entity. This means it can sue, be sued, and own property on its own. General partners are in charge of daily operations and are still personally liable for the company’s obligations and debts. The limited partners invest capital in the company and share in the profits, but take no part in the daily operations. If you are considering forming a limited partnership (LP) or a limited liability company (LLC) you should speak with a Business Lawyer to make sure it is properly formed and managed. A LP protects limited partners from personal liability; liability is restricted to the amount of capital the limited partner has decided to invest. LPs distribute funds among different shareholders as “dividends”. If the business or company is set up incorrectly, you could have personal liability for doing it wrong. Benefits of a Limited Partnership
Detriments of a Limited Partnership
Limited Liability CompanyA Limited Liability Company (“LLC”) is a business structure that can vary from state to state. In Utah, a LLC is created by completing and filing “Articles of Organization” with the Utah Secretary of State. A LLC allows for an unlimited number of owners, or “members,” and “managing members”, all of which are protected by limited liability. The managing member is usually the mouth piece or nominal head. As an LLC member, you can contribute capital and assets to the LLC or loan the LLC money. You can then obtain repayment for your loan (plus interest), a distribution of profit, or a guaranteed payment from the LLC. “Guaranteed payment” is considered members’ earned income, qualifying them for the benefits of tax-favored “fringe benefits.” A Utah LLC is a “pass through” tax entity. This means that the company’s profits and losses are passed on to the owners who must report it on their personal tax filings (IRS form 1040); LLCs do not pay taxes on a company level. The LLC files a form 1065, listing each member’s taxable profit on IRS form k-1. Members of an LLC can elect to have their LLC taxed as either a C corporation, or, by timely filing the 2553 form, as an S Corporation. Benefits of an LLC
Detriments of an LLC
Free Consultation with a Limited Partnership LawyerIf you are here, you probably have a business law issue you need help with, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.
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