The general partnership, which is the most common partnership used, has all partners sharing equally in the ownership, management decisions and responsibility for partnership debts. The limited partnership must include at least one or more general partners who participate in management decisions and who have personal responsibility for the partnership debts. There will also be one or more limited partners who do not participate in management and whose liability for partnership debts is limited to the amount they have contributed to the business. Allows persons with insufficient net worth to pool funds to purchase a business. Provides opportunity to split management duties, unless the partner is a limited partner.
Income is taxed only once.
Social Security tax rate is the lowest allowed by law. Must share the decision making with other general partners. Compatibility of the partners is essential. Each general partner has unlimited liability for the debts of the partnership. If all but one of the general partners are financially unsound and unable to pay debts, the one financially secure partner can be required to pay the total amount owed.