Establishing a limited partnership in California can provide some of the advantages of a partnership -- including pass-through taxation and ease of operation - while addressing some of the liability issues that are a key disadvantage of many partnerships.
At Howard Law, our Los Angeles business litigation department provides a wide range of business formation, litigation, dissolution and dispute-resolution services throughout the Los Angeles area, including Riverside, Anaheim and Santa Ana.
Unless otherwise addressed, laws governing business partnerships in California provide for joint authority and joint liability. This means the partnership is seen as an individual entity and any member of the partnership may incur debt or take legal action on behalf of every member of the partnership. Additionally, each member can be held responsible, legally and financially, for all partnership obligations, including legal actions and lawsuits.
A California Limited Partnership is typically formed by establishing a general partner, who is responsible for the day-to-day operation of the business, and a number of limited partners. Under this structure, limited partners can lose their contributions but their liability does not extend beyond their business contributions, which leaves their personal assets protected from business liability.
When properly established, a limited partnership has many advantages. A qualified Los Angeles attorney, experienced in establishing California Limited Partnerships, should be consulted to avoid common pitfalls. For instance, the shield against liability enjoyed by limited partners is only in effect if they remain passive and are not involved in daily business decisions. Additionally, the proper establishment of a general partner is also critical as the general partner does not enjoy the protection against liability; he or she actually assumes the liability for the entire partnership.
Under California law, the general partner does not have to be a person. One of the ways to address the liability faced by a general partner is to make the general partner another business entity, such as a corporation, which enjoys its own protection from liability.
Properly establishing a California Limited Partnership is best done by an experienced Los Angeles business litigation firm. Contact Howard Law today for a confidential appointment to discuss your options for forming a business in the Los Angeles area.
California Limited Partnerships - Call (800) 872-5925 - Howard Law