Legal and Ethical Duties and Responsibilities of General and Limited Partnerships
Scenario
Your progress and advancement in business have provided you with an opportunity to develop your company. You are very eager about this possibility, and you begin to review some of the potential legal structures (such as sole proprietorship, limited liability company, or corporation) that the new organization may utilize. A partnership seems to be an excellent option, especially because you are aware of others who may be interested in developing and/or supporting this venture.
As you begin your research, you recall the distinctions between limited and general partnerships. You decide to prepare an executive summary about the duties and the responsibilities of each, addressing both legal and ethical perspectives. You are writing this content now with the expectation that it may be shared with future investors and/or potential partners. If a partnership is pursued, the information may also be relevant in designing a partnership agreement.
Instructions
Write a 3-4-page brief proposal that addresses the following:
What are the legal and ethical duties and responsibilities of general partnerships?
What are the legal and ethical duties and responsibilities of limited partnerships?
Which option (general partnership or limited partnership) would you select? Explain your rationale. Include some of the potential benefits and disadvantages of each.
Be sure to use correct grammar, spelling, punctuation, and APA in-text citations and references.
Course and Section
Professor's Name
December 4, 2022
General and Limited Partnerships
GENERAL PARTNERSHIP
The general partnership is one of the types of partnerships that can be taken into consideration by businesses looking to expand in their industry. The most typical type of partnership employed in the commercial world is the general partnership. This type of partnership is very lucrative, so both parties should be focused on their respective businesses. This type of partnership has a high risk/high return ratio; for instance, when a business makes a profit, both partners will receive an equal sum of money based on the terms of the agreement. However, if the company reaches the point of bankruptcy, all partners will be equally responsible for the loss. As usual, it will rely on the parameters that were agreed upon.
An indefinite number of people can form a general partnership, which is defined as a partnership with two or more partners. A straightforward oral agreement is all that is needed to create a partnership; no government registration is necessary. However, most business owners in the industry insist on having written documentation of the partnership in case of an emergency when the company goes out of business. When a general partnership is formed, the partnership's liability is much at risk because business profits are only sometimes sure. For this reason, the majority of experienced entrepreneurs restrict the liability that will be at risk if their company fails ("General Partnership Definition - Business").
Since general partnerships have unlimited liability for partnership debt, if things get out of hand, all of the partners' personal assets could be utilized to settle the debt. Another ethical issue with general partnerships is that they should operate as a team and actively manage the company (Blumberg et al.). If one or more of the partners refuses to cooperate, the burden of accountability will rest on one of the partners. When a partnership needs to be fixed, there are times when the company will lag behind or falter and eventually go out of business. However, as more partners join the partnership, the debit spread will become less complicated ("General Partnership - Understand How a General Partnership Works").
LIMITED PARTNERSHIP
Just like a general partnership, a limited partnership includes both a general partnership and a simple partnership. Limited partnerships are a mechanism for investors to put money into a partnership-based company. Unlike limited partnerships, which must oversee and assist in the operation of the company, limited partnerships only have one role: providing financial assistance to the company. Due to the partnership's financial restrictions, obtaining this form of the partnership will be substanti...