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Forming a business requires you to determine what structure you’re going to use. This impacts what types of protections you have for your personal property, and it also determines what type of tax returns you need to file. 

If you and at least one other person are going into business together, you may choose to establish a partnership. There are three distinct types of partnerships that you can consider. Each is meant for a specific purpose so think about your business before you settle on one. 

  1. Joint venture: A joint venture is a partnership where the partners equally divide the profits and responsibilities; however, the venture is a limited time deal that expires after a certain period or project.
  2. General partnership: A general partnership is like a joint venture but it doesn’t expire after a project or period.
  3. Limited partnership: A limited partnership mixes owners who take an active role in the company and those who have a limited or nonexistent management role. The partners who don’t play an active role are passive investors. 

It’s a good idea to have a contract for any type of partnership; however, it is only required for the limited partnership. In the limited liability partnership, the limited partners should have specific protections and limitations covered in the agreement. 

Establishing a partnership requires considerable teamwork. If you’re looking into this type of business structure, think about the individuals coming on board with you and carefully review the contract to ensure that it provides the information, protections and limitations necessary.