WGU LIT1 Task 1 Essay

| A general partnership is comprised of a group of two or more individuals who enter into an agreement to start a business. The partners and the business are legally the same. The partners enter into an agreement called the articles of partnership and are typically equally active in the business and the business’s management, unless otherwise stated in the partnership agreement. All profits and losses are shared by the partners in a joint business venture.

When it comes to partnerships Alex, Bill, Carl, and Devon will have two options- a general partnership or a limited partnership. Partnerships are beginning to be a business form of the past. Once upon a time, partnerships were “the default form of business and provided the benefit of pass-through taxation, but lacked the important feature of limited liability” (Chrisman, 2010, p. 465). In a general partnership, each partner associated with the entity will be held liable for their own business decisions as well as

Because the general partner holds majority of the interest and the limited partners are prohibited for participating in the control of the business.

partnership to continue, in the event a partner withdraws from the group. Similar to sole proprietorship, general partnerships tend to have a difficult time rounding up funding and resources, since most of the necessary capital comes from each partner's personal assets. This in turn may hinder longevity and growth of the organization. 4. Control In a typical general partnership, all partners will have equal rights and control over the business. It allows any partner to act on behalf of the business to make decisions and negotiation with

Convenience/Burden- Like a general partnership a limited partnership is easily formed and can enjoy pass through-taxation. It can also be easier to get financing with a limited partnership. A downfall of the limited partnership is that the death of a general partner can dissolve the partnership unless a prior agreement has been established.

Income Taxes- Taxes are paid as income tax, unless the limited partnership is classified as a corporation by the IRS for tax purposes. In order to keep from being taxed this way, you would have to stick solely to the contract as written, and keep away from operating outside of the agreement.

3    • Control – A major disadvantage of the limited partnership becomes obvious when discussing the actual management of the general partnership. Limited partners have no control of the day-to-day operations of the general partnership. Profit Retention – The limited partner receives an agreed portion of the profits that typically reflects the percentage of the amount that has been invested into the general partnership.   Location – If the general partners expand or move into another state, the burden of regulatory requirements is solely on the general partners and not the limited partners. If the partners plan to move or expand into another state, they simply need to file a new DBA in that state. Convenience / Burden – A

* Limited partnerships have the convenience of allowing multiple investors as limited partners to assist with cash available to run the business and support improvements or other investments into the company. The burden of running the business falls on the general partner.

Convenience/Burden: Limited Partnerships have extra requirements placed upon them to comply with state regulatory requirements. They must maintain a registered agent to represent them in the state in which they were formed. They are also required to file an informational report with the IRS of the profits passed to the general partners.

CONVENIENCE or BURDEN – General partnerships are easy to establish and dissolve. All partners share gains, losses, and all liabilities.

* One Man’s Control - The controlling power in a sole proprietorship always will be the owner. However, the owner is free to consult to whomever he/she likes.

General partnership is formed when at least two people start a business for profit. A “statement of partnership authority” may be filed at the discretion of the partnership.

Is the most common business type, where the business is operated and owned by a single individual. In this type of business, the sole proprietor provides capital, does not share profit or loss and runs the business alone. As such, the business and the owner are indistinguishable for tax and legal purposes (Dlabay, 2011). To differentiate this business from other business types, a sole proprietorship is discussed under the following characteristics.

To overcome this problem, the partnership may take on as many Sleeping (or Silent) Partners as they wish - these people will provide finance for the business to use, but will not have any input into how the business is run. In other words, they have purely put the money into the business as an investment. These Sleeping Partners face limited liability for the debts of the partnership. A partnership, just like a sole trader, is an unincorporated business. What are the advantages and disadvantages of a Partnership?

One major disadvantage of the partnership is taxation, partners will pay the tax same way as a sole trader. Therefore they will pay the corporation tax in addition to this they will have to pay income tax. Another disadvantage is liability partners are still subject to unlimited liability same with a sole trader if the business can’t pay its