There are several different types of business management structures that new business owners can choose from when forming a company. Because the type of business management structure dictates how a business will be taxed, less common structures can be found under specific state business laws.
Some of the most popular types of business management structures include:
- Sole Proprietorships: Sole proprietorships are businesses that can be formed by a single owner. It does not need to be registered with the state; however, they are considerably simple to register, should the business owner choose to do so. The lack of paperwork and minimal procedural requirements are what make sole proprietorships a simple and inexpensive option.
- As there is only one owner of a sole proprietorship, they are held responsible for all management aspects of the company. Additionally, sole proprietors may be held liable for any risks or liabilities that are incurred by the business.
- Corporations: A corporation is a legal entity that is regulated by state law, and is considered to be separate from the shareholders. This means that only the corporation itself can be held liable for debts and liabilities. There are many different types of corporations, classified in accordance with specific factors such as their purpose, the number of shareholders, the amount of stock that is to be issued, and their overall tax structure. Some standard forms of corporations include:
- C corporations;
- S corporations;
- Professional corporations;
- Foreign corporations;
- Non-profit corporations; and
- B corporations.
- General Partnerships: Although there are four different kinds of partnerships, a general partnership is most common. A general partnership is usually formed by two or more people who wish to be co-owners of a for-profit business. Meaning, as long as both parties intended to make money from a product or service that they offer, they are considered to have entered into a general partnership.
- General partners can be held both individually and jointly liable for any losses or debts that are incurred by the partnership. Additionally, they can be held liable to the other partners if they breach their fiduciary duty to the business, as well as to third parties.
- Limited Partnerships: Alternatively, a limited partnership has considerably stricter requirements than that of a general partnership. Limited partnerships must have at least one general partner in order to oversee and manage the company, as well as at least one limited partner. As such, limited partners will have limited authority over this type of partnership, and can only be held liable to the extent of their investment. Limited partnerships will be further discussed below.
- Similar to general partnerships, the general partners involved in a limited partnership can be held both jointly and individually liable for company debts and risks.
- Limited Liability Partnerships: Limited liability partnerships provide its partners with the same obligations and financial rights as those included in general partnerships. However, with limited liability partnerships, the partners are required to register the business with the state. While limited liability partnerships offer the benefit of being free from the debts and liabilities of other parties and the partnership itself, each partner will remain liable for their own actions as well as any conduct that they personally supervise or demand.
- Limited Liability Companies: Limited liability companies combine the tax arrangements and management styles that are used in partnerships with the liability benefits that are found under a corporation. As such, members of a limited liability company cannot be held responsible for any debts that are incurred by the business. Additionally, this structure permits members to choose how they wish to be taxed.
What Is A Limited Partnership?
To reiterate, a partnership is an association of two or more people to carry on as co-owners of a business for profit. A partnership is formed when the parties to a business have the ability to share in the profits, and if they have the right to control the business. The type of partnership that was formed will largely determine the amount of liability that an individual partner may face as part of the partnership.
A limited partnership is a specific type of business partnership that allows its limited partners to receive specific legal rights. These rights act as protection against individual liability claims for reasons such as debt, losses, and/or violations that are directly associated with the overall limited partnership.
Alternatively, in a general partnership, each partner is individually and jointly responsible for the losses that are incurred by the partnership. This can sometimes put partners at a disadvantage, especially if they only play a minor role in the partnership. An example of this would be if they have contributed less funds to the business than compared to the other general partners.
Although it is called a limited partnership, each limited partnership requires at least one general partner in order to be considered properly formed. Again, the general partner will be responsible for making management decisions for the limited partnership, as well as its day to day operations.
A limited partner has limited powers over the partnership, and as such they can only be held responsible to the extent of their investment in the limited partnership. Because of this, they are largely responsible for investment duties associated with the limited partnership.
What Paperwork Do I Need In Order To Form An LP In New Hampshire?
A limited partnership (or “LP”) is a business entity selection that allows investors, known as limited partners, to invest assets into a business that is operated by others, known as general partners. LPs are primarily used to help protect the personal assets of investors from the debts and obligations of the business in which they are investing. New Hampshire has enacted the Uniform Partnership Act to regulate businesses, including LPs.
There are several requirements that an LP must meet in order to maintain its status in New Hampshire. An example of this would be how the LP must provide the state with its name. The LP name must contain the words “limited partnership” or the abbreviation “L.P.” as the last words or letters of its name. This requirement exists to ensure those doing business with the LP understand that they are not doing business directly with the partners but with LP.
In order to form an LP in New Hampshire, a Registration of New Hampshire Limited Liability Partnership form must be filed with the state. This form will require the LP to disclose:
- The name and address of a registered agent;
- The office address, phone number, and email of the business;
- The date that the LP will end, if possible;
- The name, signature, and address of each general partner; and
- The date that the LP was signed.
Additionally, New Hampshire requires the LP to state the type of business that it plans to conduct. The form is then signed by one of the LP’s partners, and is submitted for state review.
Similar to most other states, an LP that is formed in New Hampshire is given two primary benefits. First, the LP’s limited partners are generally not held personally liable for the debts and obligations of the LP. Second, the income of the LP is taxed at the partner’s personal level, rather than at the business level. This is done in an effort to avoid double taxation.
One of the disadvantages of an LP is that it can be difficult to operate. LPs should have well written operating agreements that clearly explain the rights and obligations of each partner, in order to reduce the likelihood of disputes later on.
Do I Need An Attorney To Form A Limited Partnership In New Hampshire?
If you need help forming an LP in New Hampshire, you should contact a local New Hampshire corporate lawyer. An experienced business attorney can help you understand your rights and obligations under the laws adopted by New Hampshire, and will also be able to represent you in court as needed.
Further, should any legal issues arise regarding your partnership, an attorney may also represent your interests in court, as needed.
