Michigan entrepreneurs may be interested in learning about the different types of business that can be formed. One type, a partnership, is a simple way to structure a business. They have no formal requirements and do not necessitate paperwork, but in some cases, outlining duties and obligations may be beneficial. There are a number of different types of partnerships. Each type provides varying benefits and restrictions.
The three basic types of business partnerships are general, limited and joint venture. General partnerships involve a complete and unrestricted sharing of all management duties and any profits from the business, and each partner is entitled to an equal share of the revenue. Joint ventures are essentially general partnerships that form for only one business or project.
Limited partnerships include a difference between managing partners, who have the power to make all relevant decisions to the business, and limited liability partners, who are passive in the management of the enterprise and essentially are only involved through investment. The managing partners take all liability from the business on themselves, but the limited liability partners can only lose the money they have invested. Limited partnerships are more complex than the other types and require paperwork to set up properly.
Although partnerships may not require formal documentation, it may be advantageous to have an outline that describes each party's role and relationship with the others involved in the partnership. For example, in the absence of valid document to the contrary, partnerships are required to split all profits evenly. There are also important ramifications if the business loses money because partners are personally responsible for paying any debt unless they are protected from liability in documents outlining the partnership. Drafting such documents can be complicated and may need additional scrutiny to avoid disputes. This process may be facilitated by an attorney who is familiar with business planning and other areas of commercial law.
Source: Findlaw, "The Small Business Partnership: General and Limited Partnerships - See more at: http://smallbusiness.findlaw.com/incorporation-and-legal-structures/the-small-business-partnership-general-and-limited-partnerships.html#sthash.dYSEovPS.dpuf", September 04, 2014