Successful real estate investors can look back in their career and identify at what point they realized they were going to be a success. Profits began to roll in and investment opportunities became more easily identified as each project was bought and sold.Real Estate Partnerships - Joint Ventures The investor decided to expand and bring in a partner. Or two or three. And a partnership was formed. But what type of partnership? Aren’t there different types?

Yes, there are three basic partnerships that are recognized in every state, a general partnership, a limited partnership (LP) and a limited liability partnership (LLP). What are the differences?

General Partnership. A partnership is little more than two or more individuals decide to go into business together and formed with little more than a firm handshake. This is the most common perhaps because it’s so easy to set up. There’s no paperwork to file other than permits and licenses required of any business from a sole proprietor to a corporation and there are not annual meetings or company minutes that must be kept. Yet while no paperwork is required to form a partnership, anyone committing to a partnership should craft and sign a partnership agreement spelling out who is responsible for different company tasks.

Limited Partnership. An LP is a partnership where there is unlimited liability exposure for the general partners with liability limited to the other (limited) partners. A limited partner’s personal assets are protected from the businesses’ activities such as legal claims or debts incurred by the partnership. General partners manage the business while limited partners are only liable for their investment in the business.

Limited Liability Partnership. The LLP is reserved for professional services such as a legal firm, CPAs, doctors and other businesses deemed professional by state laws. The LLP provides liability protection for all its partners for activities performed by the partnership. Both the LP and LLP however do not protect individual partners from personal activities.

Forming a business entity takes a bit of research and depending upon the type of partnership, professional advice from an attorney is advised. Taking on partners in a business creates a brand new dynamic and a sign of a growing company. Just get the proper paperwork in place before you move too much further.