In the U.S., the central government has no specific statutory law regulating the partnership form of business. However, individual states govern partnership firms by their statutes. To have uniformity regarding the laws meant for partnership business, The Uniform Law Commission (ULC) issued an act called the uniform act, which devises rules and instructions to maintain uniformity in the laws governing partnership firms across the states.
There are different types of partnerships allowed by American regulations. They are explained below.
General partnership: When two or more people come together to form a partnership business, it is called a general partnership. In a general partnership, a business need not be submitted to the states while forming. The partners generally sign an agreement defining the clauses of the partnership, which include the rights, responsibilities, liabilities, etc. The agreement is known as a partnership agreement.
Limited partnership: A limited partnership, unlike a general partnership, requires the authorization of the state during formation. Under a limited partnership, at least one member enjoys the benefit of limited liabilities while enjoying the profits derived from the company. The partner who brings in the capital to the company is only limited to losing the capital they brought to the company, and the liabilities left further will not concern them.
Limited liability partnership: Limited Liability Partnership (LLP): An LLP is authorized and registered under state regulations. In a partnership business, the partners are independent of each other's liabilities, meaning they are individually responsible for their errors and must address consequences by covering liabilities individually. Limited liability partnerships are restricted in many states of America, with certain clauses preventing common individuals from participating in LLPs. Only specific professional workers in society are provided with the option to benefit from the limited liability partnership.
Limited liability limited partnership: In terms of liability laws, a limited partnership is considered the most favorable form as it restricts the liabilities of each member to the capital they invest in the company. An LLLP is a relatively new form of partnership and is not universally permitted in every state in America. The primary drawback is for lenders and creditors, as their coverage is limited to the amount invested in the business. Caution should be exercised when lending to an LLLP.