Compare general, limited, and limited liability partnerships. Formulate reasons as to why a group of prospective partners might choose each. (4 points)
General partnership: In a general partnership, all partners share equal responsibility and liability for the business. This means that each partner is personally liable for the debts and obligations of the partnership. Prospective partners may choose a general partnership if they want to have equal ownership and decision-making power in the business, and are willing to share the risks and liabilities equally.
Limited partnership: A limited partnership consists of both general partners, who have unlimited liability, and limited partners, who have limited liability and limited involvement in the day-to-day operations of the business. Prospective partners may choose a limited partnership if they want to invest in a business but do not want to be personally liable for the debts and obligations of the business. Limited partners also enjoy some protection from the actions of the general partners.
Limited liability partnership (LLP): In an LLP, all partners have limited liability for the debts and obligations of the business, regardless of their level of involvement in the business. This means that each partner is protected from the actions of the other partners. Prospective partners may choose an LLP if they want to protect their personal assets from business liabilities, while still maintaining equal ownership and decision-making power in the business.
Overall, the choice of partnership structure will depend on the preferences and priorities of the prospective partners, including their risk tolerance, desired level of involvement in the business, and desire for liability protection.