Key Terms
DEFINITION
Largely a legacy entity. Before LLCs and LLPs existed, this was the only option for professionals who wanted limited lia
FORMATION
File articles of organization with the Secretary of State (or equivalent). Most states require only the LLC name and the
CONTROL
Total. The owner sets hours, pace, direction, and keeps all revenue.
TAXATION
PCs are separate taxable entities. They are NOT flow-through entities.
LIABILITY
Members risk only their financial investment. Personal assets are not reachable by business creditors.
CAPITAL
Difficult to raise, especially early. Lenders usually require personal guarantees from LLC members.
CONTINUITY
None. The business and owner are legally the same.
ARTICLES OF PARTNERSHIP
A formal written agreement if the partners choose to document terms. Can include anything the partners want about manage
PROFIT SHARING
Equal by default, regardless of varying monetary contributions. Partners can modify this by contract.
DISSOLUTION
Automatic when the agreement to share profits and losses ends. In a multi-partner firm, remaining partners can reconstit
FIDUCIARY DUTY
All partners owe a fiduciary duty to the partnership. Specifically:
LIMITED PARTNER
Can only lose the amount of their investment. Not liable beyond that.
GENERAL PARTNER in LP
Still has full unlimited liability and manages the business.
AGREEMENT
Franchise agreements are highly detailed. May require specific vendors, ingredients, store layouts, and colors.
INTERNATIONAL USE
Franchises are popular for US companies operating abroad because the business is owned by a local resident. This allows