10 Reasons You Should Opt for a Limited Partnership

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By John Wick

Starting your own business nowadays is full of risks. You need to have reliable funding sources, expert team members, and excellent marketing and product management strategies to succeed as an entrepreneur.

Contrary to popular belief, a limited partnership can ensure all that and can also improve your startup culture. It can do so by helping people to build stronger ties, better communication networks, and more ethical values at work. But before discussing the benefits of a limited partnership, it is important to have clarity about this concept.

What Is a Limited Partnership?

It is a kind of business partnership in which one owner is a general/bigger partner and there are one or several other smaller/limited partners. Normally, the general partners are the major actors involved in the decision-making process. They handle all the operations and manage all finances. The limited partners simply offer financial services and receive a share of profits in return. However, the responsibilities can vary depending upon your relationship with the limited partner.

Advantages of a Limited Business Partnership

A limited partnership can ensure the following benefits for your business:

Fewer Legal Obligations

The legal and financial processes are quite simple for businesses with multiple partners. You won’t need to finish a Corporate Tax Return unlike a business with only one owner. The partners can manage the expenses, details of profits, and tax returns on their own. You would also be able to surpass the need for a confirmation statement with this kind of partnership.

Easier Capital Investment

You won’t need to run after people to invest in your business by opting for a limited partnership. Investors are not scared of a limited partnership because they can’t lose more than they invest through such a setup. But you have to be careful and hire attorneys while going through the paperwork. This is because big investors can often make vague and difficult demands.

Easier Set-Up

You won’t need to get your business partnership registered with Companies House. You can create it instead of both verbally and in writing. By registering the partnership with HMRC and transferring the rights and responsibilities to paper, you can get started with your business.

More Flexibility

Opting for a limited partnership can save you a lot of troubles. You won’t need to manage all important business operations and decisions on your own. You can rely on your partners to manage everything from finances to decisions if the partners are trustworthy enough. But for that, you have to make sure that the right and responsibilities of every partner are clearly defined and documented. Otherwise, even your partners can end up suing you.

Better Burden Sharing

Besides the sharing of responsibilities, your business partners can share your business-related stress too. Make sure to develop a good relationship with them so that any financial or other sorts of problems can be managed easily in case of a crisis.

Better Resource Pooling

The best way to start a limited partnership is to involve your friends and family. Convince them to invest money and resources in your business. And offer them free products/a share of profits in return. Since your friends and family members might belong to different fields, this can give you easier access to lawyers, manufacturers, and entrepreneurs.

Estate Tax and Other Benefits

By forming several “family limited partnerships,” you can benefit by bypassing the additional taxes and pass more wealth to your heirs. Not only that, but you can also enjoy several other gift tax benefits by forming such partnerships.

More Privacy

If you are operating a business on your own, you might need to keep track of your employees’ activities by yourself to ensure confidentiality. However, if you have multiple partners, they can do this job for you. This will give you more time to focus on other important things. Also, limited companies can have their important documents sent to Companies House for public inspection at any time.

Better Access to Profits

In a limited partnership, the profits reach each partners’ personal tax returns directly instead of being retained within the partnership. It ensures better and easier access to profits. In a limited company, however, profits are retained within the company. First, it is made sure that salaries and dividends are paid out and then partners get access to the profits.

Better Access to Resources, Contacts, and Diverse Skill-Sets

A limited partnership can also give you better access to resources, contacts, and the workforce. This is because every partner has his own unique contacts, experiences, and skill-set. When I started my own business, one of my partners offered the best hiring strategies during the planning phase. So, partnerships can help in achieving business goals easily.