A written partnership agreement specifies terms more precisely, including termination conditions, division of profit and loss, division of responsibilities for the conduct of business, etc. A fictitious name filing can be made if a trade name is used. Limited Partnerships To obtain limited liability for the passive investor, or limited partners, a Certificate of Limited Partnership should be filed with the Secretary of State in your state. Limited partners are liable only to extent of their capital contribution for their limited partnership interests. Limited liability is contingent upon total lack of involvement in business or management of enterprise.
Limited partnerships require one or more personally liable general partners.
For example, any partner can create an obligation of the partnership. In other words, your partner can sign a contract that you disagree with, but your business will still be obligated to pay for it. In other words, even if you had nothing to do with a particular liability, the creditor can collect it from the business, the responsible partner or you, the innocent partner, at the creditor's choice. Although partners can try to recover losses from the wrongdoing partner, third parties can collect from the partners with the most assets or the easiest ones to reach, regardless of fault. Professional tax and financial planning can solve this problem, particularly in smaller businesses where the ability to provide tax-advantaged benefits may be a major consideration for the owners.