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Nevada Revise Statute, Chapter 87, governs partnerships in the State of Nevada. A partnership is an association of two or more persons to carry on as co-owners of a business for profit. The concept of a partnership existed at common law and certain common law partnership norms are codified in NRS Chapter 87 and act as default rules when there is no written partnership agreement between partners. Therefore, it is critical for any partnership to operate based upon a partnership agreement if partners are to be clear on the expectations between them.
Partnerships may be general or limited, the main difference being that the general partner has the right to participate in the management and operation of the company and therefore incurs unlimited personal liability for that activity, whereas the limited partner has limited rights to participate in management and therefore incurs limited liability only in the amount of their investment in the company.
Limited liability partnerships are common with professionals because they allow the partners to allocate control and liability based on the scope of expertise and their contribution to the enterprise. For example, liability for a particular business activity may be contractually limit to a single partner based upon the amount of control that partner exercises over that business activity. And silent partners, or investors, may ensure that their liability is altogether limited to their contribution to the enterprise. Further, limited partners may negotiate guaranteed payments in return for their investments, which allows general partners access to funds without having to negotiate loans. Both general and limited partners may allocate distributions to reflect the contributions each partner makes, ensuring that the partner that contributes more to the enterprise, whether through expertise, labor, or assets, receives a greater share of the proceeds.
Partnership agreements are important because through them partners have great flexibility to determine contributions to, management over, and liability for the operations of the enterprise. Also important is that like limited liability companies, partnerships enjoy pass-through taxation with the IRS. We prepare partnership agreements so that general and limited partners have flexibility and clarity to craft optimal business arrangements that result in positive results for all involved.
Nevada Revise Statute, Chapter 87, governs partnerships in the State of Nevada. A partnership is an association of two or more persons to carry on as co-owners of a business for profit. The concept of a partnership existed at common law and certain common law partnership norms are codified in NRS Chapter 87 and act as default rules when there is no written partnership agreement between partners. Therefore, it is critical for any partnership to operate based upon a partnership agreement if partners are to be clear on the expectations between them.
Partnerships may be general or limited, the main difference being that the general partner has the right to participate in the management and operation of the company and therefore incurs unlimited personal liability for that activity, whereas the limited partner has limited rights to participate in management and therefore incurs limited liability only in the amount of their investment in the company.
Limited liability partnerships are common with professionals because they allow the partners to allocate control and liability based on the scope of expertise and their contribution to the enterprise. For example, liability for a particular business activity may be contractually limit to a single partner based upon the amount of control that partner exercises over that business activity. And silent partners, or investors, may ensure that their liability is altogether limited to their contribution to the enterprise. Further, limited partners may negotiate guaranteed payments in return for their investments, which allows general partners access to funds without having to negotiate loans. Both general and limited partners may allocate distributions to reflect the contributions each partner makes, ensuring that the partner that contributes more to the enterprise, whether through expertise, labor, or assets, receives a greater share of the proceeds.
Partnership agreements are important because through them partners have great flexibility to determine contributions to, management over, and liability for the operations of the enterprise. Also important is that like limited liability companies, partnerships enjoy pass-through taxation with the IRS. We prepare partnership agreements so that general and limited partners have flexibility and clarity to craft optimal business arrangements that result in positive results for all involved.
At Hutchings Law Group, our business is your business.