Question

Raskolnikov just finished a residence in internal medicine and wants to go into practice with Sophia and Katrina.Raskolnikov tells you that while he needs to practice with other physicians for call coverage and for other reasons, he does not want to be personally liable should the other physicians be found guilty of malpractice. You discuss various incorporation options with him, but he tells you that he would like to form a partnership. What business forms would you recommend to him and why? [Hint: In your response, you are to name the type of partnership and how it differs from other partnerships, and the benefits. Remember that you are to discuss it, and not merely state the name or the form of partnership.]

Essay:

Answer 1

As Raskolnikov has already decided to go for a partnership Organization thus we have to discuss the different type of Partnership firms. There are several type of Partnership firms and type of partnership and involvement is generally mentioned in the Partnership Agreement that needs to be signed by partners before starting an Organization legally. legal obligation depends on state to state however some General characteristics can be discussed.

1. General Partnership- In this form of Business Organization two or more partners agrees to operate business actions as partners or co owners. The kind of Profit/loss sharing is equal unless there is a mention in the Partnership Agreement. In this partners generally takes responsibility for the partnership's debt. Profit are not generally taxed at Company level instead income tax is applied on personal level. Partners are liable for each others wrong doing and personal assets are always at risk in this form of partnership. The incorporation cost is low and these are easy to establish as well as flexible.

2. Limited Partnership- In this form of Business Organization one general and limited partners agrees to work in a more structured way. The limited partner acts as an investor and doesn't have decision making rights. They get ownership bu they don't have risk and responsibilities as general partner who operate the company and assume the liabilities of the partnership. This kind of partnerships give protection to personal assets to only limited partners and not to the general partners.

3. Limited Liability Partnership- In this form of Business Organization two or more partners agrees to operate business actions where they are not held responsible for the Business' debt or partner's wrongdoing. In case of any legal actions towards any partner for the business activities, the partner's personal assets remain safe however the partners will be held responsible if they do something wrong personally. To add or remove any partners are easy in this form of structure thus flexibility will be there.

4. Limited Liability Company Partnership- In this form of Business Organization two or more partners agrees to operate business actions as members and they get immunity for the Business' debt but they are held liable for the other members action. This for of partnership gives personal Liability protection as well as tax Flexibility for its members.

Thus as per his decision and the effectiveness the Limited Liability partnership (LLP) will be the best option his future endeavour where he will get flexibility, personal asset immunity, limited liability towards partner's wrong doing!