Question

Flora and Fauna want to start a landscaping business venture together. They want to each own 50% of the venture and want to share profits 50/50. Both ladies want some liability protection from creditors/customers of the business. What entity options are available to Flora and Fauna that will meet their needs? What entities work for them if they want to split income 70/30 but ownership 50/50?

Answer 1

For the case where Flora and Fauna want to have 50/%0 stake in business venture and share profit but need to have liability protections, forming a limited liability partnership looks like an ideal structure for them. This is so because in a LLP each of the partners enjoys protection from partnership’s debts and liabilities post fulfillment for general criteria for this form of structure.

On the other hand for the case where Flora and Fauna wants to have 70/30 incomes split but a 50/50 investment in business venture, Limited Partnership is what is ideal structure to go for. This is so because this structure supports two forms of partners, General and Limited. As the name suggests Limited partner has limited rights but limited risk exposure as well and hence limited agreed upon benefits as well. As in this case the requirement is on similar lines where both partners will invest equal amount but agree to have different level of income sharing, this form looks ideal.