Launching a new business can be an exciting adventure. Yet, it can also be a stressful, time-intensive and relatively exhausting one. After all, there is usually a lot on the line, so new entrepreneurs tend to work long and hard to get things in order before opening their new company’s (literal or figurative) doors.
One of the first things that aspiring business owners need to do is choose a formal business structure for their new venture. If you’re looking into this process because you hope to open a business with at least one other party, you may be considering a partnership structure.
Types of partnerships in Texas
Texas law recognizes several types of partnerships. It’s important to consider each carefully, as any given structure will impact a business and its owners in different ways.
- General Partnership (GP): In a general partnership, all partners are empowered to share equal responsibility for managing the business and can all be held personally liable for the business’s debts and obligations. This structure is straightforward but carries significant risk, as each partner’s personal assets are at stake if the business faces legal or financial troubles.
- Limited Partnership (LP): A limited partnership includes both general and limited partners. Limited partners contribute capital but have limited liability and typically do not participate in day-to-day operations. This structure allows for raising capital while protecting limited partners from personal liability.
While not technically a partnership, structuring a business as an LLP is also an option. This opportunity provides protection for all partners from personal liability for the business’s debts and obligations. This structure is often ideal for professional services firms wherein partners want to limit their exposure to the actions of other partners and/or are particularly likely to be sued as a result of the nature of the work at issue.
Which structure will work best for your business? The answer to this question will depend on your needs, goals and circumstances. Seeking legal guidance can help you to evaluate your options and make informed decisions.