PARTNERSHIPS
General Partnership: A general partnership may be established solely from the conduct of the parties. Each partner is a principal for himself or herself and an agent for the partnership and the other partners. The general partnership is governed in Maryland by the basic principals set forth in the Maryland Uniform Partnership Act. No written agreement or filling is necessary to create this type of business organization. The Act operates as a "safety net" of rules if the partners in a general partnership have not discussed unanticipated contingencies. A lawyer's counsel, therefore, is vital not only to inform the partners of the decisions made for them by the Act, but also to encourage them to decide for themselves certain issues that would otherwise be controlled by the Act.
Altough a partnership is easily created, maintained, and terminated, a prudent person should seek legal advice when creating a general partnership and put the partnership agreement in writing. Written documents that clarify the allocation of control and financial interests between the parties and strengthen fiduciary, disclosure, or other duties are widely used and are helpful to the entrepreneurial planning process, as well as to later operation of the business.
Limited Partnership: Formation of a limited partnership requires not only an understanding of Maryland law, but also sophisticated knowledge of the tax and securities law implications of limited partnerships. Limited partnerships were developed to encourage investment of funds form those who were desirous of making an investment in the ownership of a business, but not inclined to assume full partnership responsibilities and liabilities. In Maryland, limited partnerships are authorized and regulated by the Maryland Revised Uniform Limited Partnership Act.
A limited partnership is defined as a partnership formed by two or more persons and having one or more general partners and one or more limited partners. Formal requirements must be met for the limited partnership to achieve legal existence: a Certificate of Limited Partnership must be executed by all partners and properly filed with the State Department of Assessments and Taxation(SDAT).
The designation of partners as "general" or "limited" dictates the allocation of control and financial interests among them. General partners manage the partnership and limited partners are strictly limited in the control that they may exercise and retain their limited liability as limited partners. "general partners are personally liable for all of the obligations of a limited partnership, and limited partners generally are not bound by the obligations the partnership.
Limited Liability Partnership: A limited liability partnership (LLP) is formed when a general partnership registers as an LLP by filing a certificate of limited liability partnership with SDAT. A limited liability partnership functions in the same way as a general partnership, with one exception: in a limited liability partnership, the general partners are not individually liable for the obligations incurred by the partnership or by other partners unless a partner is guilty of negligence or misconduct.
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