The most used partnership types are listed here with their distinct features to allow you choosing the suitable type.
In this type of partnership, each partner has right to take decision about the working and management of the firm. Downside being that the partner’s liability is unlimited and in case of a financial error / loss incurred by the act of a single partner the personal assets of all the partners can be taken away to pay back the debts and creditors’ claims.
General partnership is further bifurcated into two categories:
1. Partnership at will:
Usually when a partnership is created, it is upon the partners to decide till when they want the partnership to exist. Hence, whenever a partnership is created without a specific time limit of its closure, its termed as partnership at will. The dissolution of partnership is the matter of mutual consideration when need arises and is not pre-decided. It is upon the partners to decide mutually till what period of time they want the partnership to be functioning.
2. Particular partnerships:
This is the type of partnership that is created with an aim to carry out a specific undertaking. When partnership is created for a project of a temporary contract-based work or a specific business only, they are termed as particular partnerships. Once the objective of the business is achieved or the act for which the partnership was created in fulfilled, the partnership will be dissolved. However, the partners have the discretion to come to an agreement in case they wish to continue the said partnership. But in the absence of this, the partnership ends when the task is complete. For example, a partnership for the construction of a building or partnership for producing a movie.
Limited Liability Partnership (LLP):
A limited partnership unlike general partnership is a corporate form of business organization. Here, the liabilities are limited to each partner according to their agreed contribution to the business. The personal property of a partner cannot be attached to pay back the firms debts. This hybrid organization is governed under the Limited Liability Partnership Act, 2008 and not under Partnership Act.
Based on Partnership Registration Status:
The Partnership Act does not mandate the registration of partnership firm. Both, registered and unregistered firms are valid and recognised under law.
1. Unregistered Partnership Firm:
An unregistered firm is established by execution of an agreement by the partners. The unregistered partnership firm allows the Partners to carry on the business in manner stated and provided in the agreement.
2. Registered Partnership Firm:
The Partnership Firm is to be registered with the Registrar of Firm (RoF) having jurisdiction over the place of business of the Firm. The registration application involved payment of registration fee to RoF, varied from state to state according to the State Law. The registered partnership firm is preferred in many cases due to the benefits offered by a registered partnership firm.