Alternative Partnership Structures

We've discussed general partnerships. Here's a very high level introduction to three alternative forms of partnerships, (1) limited liability partnerships (LLPs); (2) limited partnerships (LPs); and (3) limited liability limited partnerships (LLLPs). Subsequent sections will cover this in more detail.

Limited Liability Partnerships. A major drawback of general partnerships is that partners are personally liable for the unpaid debts of the partnership. A limited liability partnership is a partnership that operates like a general partnership, but gives the partners limited liability. That is, they are not personally liable for the unpaid debts of the partnership. So if you and I form a limited liability partnership, then I blow all our money on Fabergé eggs, you'll lose your investment, but the partnership's creditors can't come after you for anything beyond that. This type of partnership is often used in professional services fields where partners want to avoid personal liability for the malpractice of other partners.

Limited Partnerships. A limited partnership is like a general partnership, but it has two classes of partners: general partners and limited partners. The general partners get to manage the have day-to-day business but face unlimited liability. The limited partners have limited liability but involvement in management and limited liability. Limited partners are also occasionally referred to as silent partners. This structure reflects the general principle you may have noticed in this course, that if you have more control, you'll face more liability.

Limited Liability Limited Partnerships. A limited liability limited partnership is a relatively recent form of partnership that combines features of a limited liability partnership (LLP) and a limited partnership (LP). In a limited liability limited partnership (LLLP), the general partners manage the entity but they also have limited liability like the limited partners. The limited partners also have limited liability.

Limited Liability Limited Partnerships of Limited Limited Liability Partner Liability (LLLPLLLPL). The distinct aspects of the LLLPLLLPL are that a...okay, we just made that one up. But with the proliferation of new partnership entities, it probably is not far off. The field is really spiraling.