Partnership and limited liability partnership in the United States Essay

Partnership and limited liability partnership in the United States - Essay Example Humans have since time immemorial been considered social beings making partnership between individuals a common concept. Partnerships can as well exist between businesses, interest based organizations, schools, governments allowing for their nature and structure to be varied. Under this type of arrangement, partners agree to share their profits and losses and this mutual understanding is what allows them to operate efficiently (Wood 21). People engaging in partnerships often have varied reasons for their union. Some partner with others in order to increase their likelihood of achieving their goals when the situation calls for1. Others may partner simply to pool resources together in order to be able to participate effectively in the business world. While profits may be the driving force for some, strategic positioning is a major underlying reason for the formation of partnerships especially amongst those who are actively engaged in the business world. And because each member brings a long their own set of reasons for forming the alliance, partnerships have been marred with special challenges and issues. It is because of the dynamic nature of partnerships that the concept of civil law was introduced in their formation (Smith 16). An agreement is a symbolic tool of understanding between partners in any engagement. These agreements define each individual's goals, the company's overall goal, roles and responsibilities of each partner, lines of authority and succession, how achievements and shortcomings are to be classified, and most important, how resources are to be shared within the company. And because of the detailed nature of these agreements, they are required to be written down on paper and appropriately signed by all members in the partnership. This is done for future reference and each party often advised to keep a copy of the agreement. Articles of partnership are often drawn by the partners who are members of the partnership in order to make the document legally enforceable by law. (Smith 17). The roles of partners are often quite defining as to the nature with which they interact with the organization. In a general partnership, all partners manage the business and are personally liable for any expenses that are incurred during the management of the business. In the United States, there have been established limited liability partnerships which have got different features as compared to other forms of partnership2. A limited liability partnership accords its owners limited personal liability which is suitable for use in professional groups like accountants and lawyers3. The nature of Limited Liability Partnership These partnerships are often preferred because one partner does not wish to be liable for the problems or mistakes made by other partners within the organization. This is often the case is malpractice claims that may prove detrimental to the company even if they are fully enforceable by law4. In the case of malpractice clai ms, LLP protects each partner from any costs or expenses arising from any malpractice lawsuits that may be leveled against one partner5. Overall, LLP's have similar advantages as those realized in limited partnerships. One can still take part in the management of the business in an active manner, without exposing themselves to personal liability for the decisions and actions undertaken by the other partners beyond the value of their investment in the arrangement.