Are there different types of business partnership?
Are there different types of business partnership?
There are three types of business vehicle that can (at least loosely) be classified as “partnerships”. However each one is completely different and creates a completely separate and distinct business entity. The most common is the traditional partnership. There is also the limited liability partnership and the limited partnership. The main features of each are:
A partnership will be implied by law when two or more people are in a business relationship with each other. It is often an extension of the sole trader model and has traditionally been used by professional service firms. Like a sole trader, a partnership has no legal personality. Partnerships are governed by the Partnership Act 1890.
A limited liability partnership (or LLP) is a relatively new corporate vehicle, introduced by the Limited Liability Partnership Act 2000. It is a hybrid corporate vehicle between a limited company and a traditional partnership and must be incorporated. The fact that it offers limited liability means LLPs are increasingly being used by businesses which involve a larger number of owner/managers and especially larger professional services firms.
A limited partnership (or LP) is a partnership registered in accordance with the Limited Partnership Act 1907. It is formed between two or more persons who carry on a business with a view of profit. An LP broadly resembles an ordinary partnership except that an LP will have two categories of partner, general partners and limited partners. LPs are generally used as investment vehicles for venture capital and private equity investment funds.