The choice of entity and business structure that determines how you as a business owner will conduct your business is very important.  There are many options available to the business owner who is looking to begin a new business enterprise or even to someone who is buying an existing business.  Keep in mind that the laws and rules governing the different types of entities vary from State to State.  Before making this choice we highly recommend that you consult with a CPA (certified Public Accountant) and a qualified attorney.  There are many significant implications in the selection of business entity under which you will operate the information presented in this section is only to give the reader a general idea of the type of entities that are available.

The main types of business entities that you can operate under are:

1. Sole Proprietor
2. General Partnership
3. Limited Partnership
4. Limited Liability Partnership
5. S-corporation
6. C-corporation
7. Limited Liability Company

3.  Limited Partnership

A limited Partnership of LP as it is commonly know is a variation of the a regular plain vanilla partnership with one key difference – unlike a general partnership where all the partners are general partners, in a Limited Partnership a new class of partners is created called Limited Partners.  This form of business entity is excellent for businesses where one or few people will operate and manage the business operations and the rest of the participants wish to remain dormant silent investors in the company without day to day management responsibilities and duties.

In a Limited Partnership, general partners still are in the same regular role as the partners of a general partnership – they act as agents of the partnership and their actions binds the entire partnership; they have unlimited liability from creditors and litigants and share in the profits of the firm based on a predetermined profit sharing model.  However limited partners will usually have limited liability for the debts incurred by the firm – they cannot be held accountable for more than their share in the Limited Partnership.  In order for limited partners to denote their status of limited liability they have to file papers with the appropriate state agency.  Every Limited Partnership has to have at least one general partner whose liability is unlimited.

As far as taxation is concerned, just like in a regular partnership, there is no double taxation and the income and profits of the partnership pass through to the partner’s personal income tax.  This kind of business entity is most commonly used by legal firms, accounting firms and also the financial services and real estate industry.

Yet another advantage of a Limited Partnership is that new partners can be added and the rights in the partnership may be transferred pending approval from the remaining partners.