What Is the Difference between a General and Limited Partnership?

1. What Is the Difference
between a General and
Limited Partnership?
By: Jake Posey

2. What Is the Difference between a General and
Limited Partnership?
Since 2006, Jake Posey has provided dedicated service as an attorney and counselor
with The Posey Law Firm, PC, in Austin, Texas. Jake Posey provides guidance on a
range of issues related to government relations and businesses, including the formation
of partnerships.

3. What Is the Difference between a General and
Limited Partnership?
Before forming a partnership, individuals should consult with an attorney to make sure
that it is the right decision for the business. In Texas, business partnerships can be either
general or limited partnerships. General partnerships involve two or more parties creating
an entity, and sharing of profits and losses can occur without any filings with the
Secretary of State. However, it is advisable to create a formal agreement to avoid
disagreements down the line. The agreement should set out the responsibilities of each
partner, how the partnership will work, and the interests of involved parties.

4. What Is the Difference between a General and
Limited Partnership?
Limited partnerships provide protection from the debts and claims of the company for
limited partners while still allowing profits and losses to pass through the company to
general partners. These agreements walk the line between corporation and general
partnership. All limited partnerships need to be filed with the Secretary of State.
Furthermore, having a written agreement about duties and rights of general and limited
partners can avoid problems in the future.

5. What Is the Difference between a General and
Limited Partnership?
With both forms of partnership, profits and losses pass directly to partners, who must
then pay taxes on gains as general income. Often, forming a different type of business
entity that retains profits and then distributes them provides more economic advantages.