Sunday, August 21, 2011

What EB5 investor should know about forming a partnership

Partnership is acceptable as a form of investment in EB5 program. Partnership is common form of ownership in United States. Knowing what you are getting into is important, isn't it?

We provide general ideas of partnership here. For better understanding, consulting with a lawyer is strongly advisable.

General Partnership
Partnership is established once two or more persons enter into agreement for profit. Partnership has the following characteristics:
1) Each partner is personally liable for business debts, taxes or tortious liability. F
2) A partnership agreement may provide for the manner in which profits and losses are to be shared.
3) Each general partner is deemed the agent of the partnership. Therefore, if that partner is apparently carrying on partnership business, all general partners can be held liable for his dealings with third persons.
4) A partnership agreement may designate certain partners to manage the partnership along the lines of a company board.

Limited Partnership

A limited partnership, like general partnership, has two or more partners. The difference is that some partners are general partners, some are limited partners. While general partner has unlimited personal liability,  a limited partner's liability is limited to the amount of his or her investment in the company. LP's are creatures of statute since they must file with the state to form them. Because of the limited liability of limited partnerships, they often are used as vehicles for raising capital. The limited partnership is a separate entity and files taxes as a separate entity.

Limited Liability Partnership
An LLP allows all the partners receive limited liability protection. In a LLP, all the partners can take an active role in managing the day-to-day affairs of the business. In order to form LLP, an LLP must first register with the Secretary of State. An LLP formed in another state must register with the Secretary of State where they conduct business. 

Even if you have a basic understanding now about partnership, you should retain a lawyer to choose the best form for you.