We’ve already discussed what Minnesota partnerships are and what some of the pros and cons of choosing that particular form of business entity.
Now that you have a general background of knowledge regarding partnerships, lets dig a little deeper and explore some of the different varieties of partnerships that can be formed in Minnesota.
Minnesota Partnership Law | General partnerships
General partnerships are the default state of a partnership. These are the simplest form of a partnership and typically result in handshake and other informal cases where little has been done to clarify the role of partners in the organization.
General partnerships in Minnesota exist where all partners evenly share the businesses’ management and profits. Issues in a general partnership are settled by a vote of the majority of the partners, something that can lead to dangerous stalemates in the case of only two equal partners.
In terms of liability, all partners are held equally responsible for the debts of the partnership. That means that partners will share liabilities just as they share assets and these liabilities can even extend to reach their personal assets.
Minnesota Partnership Law Limited partnerships
Limited partnerships are more complicated than general partnerships and result from specific agreements that outline the different roles of partners in the entity. Limited partnerships exist where two classes of partners own a firm: general partners and limited partners. General partners are those who are tasked with managing the company and can be held personally liable for the company’s debts. Limited partners, on the other hand, contribute money to the operation and share in profits, but do not participate in management decisions.
The biggest difference in limited partnerships is that limited partners are not liable for the debts of the business beyond the amount of money they have directly contributed to the company. That means that limited partners experience a similar limitation of liability that shareholders in corporations have.
Limited partnerships cannot be formed by simple oral agreement and instead need to have paperwork filed with the state. Here in Minnesota, those interested in forming a limited partnership or those interested in converting a general partnership into a limited partnership must file a Certificate of Limited Partnership with the secretary of state.
Minnesota Partnership Law Limited liability partnerships
Limited liability partnerships exist in cases of licensed professionals joining together in business. Examples include LLPs for lawyers, accountants or architects. LLPs are beneficial in these cases because they protect partners from the potentially negligent actions of each other. Partners in an LLP are not personally liable for the acts of other partners, but can be held personally liable for their own actions. Limited liability partnerships are discussed in Minnesota Statutes, beginning in Section 323A.1001.
It’s good to know that with the right help, establishing a Minnesota small business does not have to be a scary proposition. Experienced Minnesota small business attorneys can help walk you through the process of setting up your new company and ensure it offers the maximum benefits for your individual situation. For more information, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
Source: “The Legal Ins and Outs of Forming a Partnership,” by Michael Spadaccini, published at Entrepreneur.com.
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