When two or more individuals enter into a low risk business a partnership may serve their purpose. The terms of the partnership should be reduced to writing called a “partnership agreement”. This agreement is important from the beginning to outline all the issues the partners will expect to be part of their business venture. In addition, this “partnership agreement” can be a vital document in the event of later disagreement between the parties as to their respective rights and obligations. One disadvantage of a partnership is that all general partners are personally responsible for the debts of the business and all of their individual assets may be loss if the business fails.
The partnership may be set up with a combination of general and limited partners. The general partners will run the business and still be personally liable for the debts of the business. The limited partners do not run the business and their liability is “limited” to the amount of their investment in the business and, therefore, their personal assets are protected from the business’s creditors.