Advantages of Doing Business in Limited Partnership
There are many advantages of doing business in limited partnership. For both general as well as limited partners, limited partnership has unique advantages.
Limited Liability for Limited Partners:
Limited partners have no liability on the debts and obligations of the limited partnership in excess of their of capital contribution to the limited partnership firm.
Limited Liability for All Partners of Limited Liability Limited Partnerships:
Both general and limited partners of a limited liability limited partnership incur no personal liability for the debts and obligations of the limited liability limited partnership.
Limited Partnership Tax Benefits:
Income of the firm ‘flows through’ to the partners. The partners are assessable on their respective share of profits of the firm on their individual income tax returns. Subject to restrictions, the partners can claim their share of loss of the firm on their personal income tax return. In order to reduce their income tax liability, the partners can set off such loss against their income.
Moreover, limited partnerships are not liable to federal income tax.
Transferability of Partnership Interest:
Limited partners have much more freedom to transfer their interest in the limited partnership than the partners of a general partnership. In case permitted under the limited partnership agreement or with the unanimous approval of all the partners, the entire interest of a limited partner may be assigned, with the assignee becoming a new substitute partner. The assignment of a limited partner’s interest in a limited partnership does not cause dissolution of the limited partnership firm.
Business Continuity:
Limited partnership has much more continuity of business than proprietorship or general partnership. A limited partnership need not be dissolved on the withdrawal, retirement or death of a partner if there is at least one other general partner carrying on the business of the firm and the partnership agreement permits the business to run by the remaining general partner. Moreover, any limited partnership need not be wound up or dissolved even on the withdrawal of its one and only one general partner from business, if within 90 days of such withdrawal all partners agree in writing to continue the business of the limited partnership and to the appointment of one or more additional general partners to keep the business of the partnership running.
Diversified Capital Resources:
Unlike proprietorship concerns or general partnerships, limited partnerships can induct passive investors as limited or financing partners, without personal liability under the provisions of the Limited Partnership Act.
