If you want to form a new business or already have a business, you may be wondering what entity is right for you. Limited Liability Partnership (LLP), Limited Partnership (LP), General Partnership (GP), Limited Liability Company (LLC), S. Corp. and C. Corp. are common business entities in Pennsylvania and are generally used in different circumstances. Which entity is right for you depends on a number of factors such as taxation, liability for owners, control over business decisions and transferability of ownership. This article will briefly describe various business entities and when each entity may be right for a particular business, as well as how to form the entity and certain costs associated with forming and carrying on the business.
General Partnership (GP). Unless another entity is formed, whenever two or more people carry on a business for profit in Pennsylvania they are a general partnership. No document needs to be filed or signed for this type of entity to exist and, if there is no Partnership Agreement, Pennsylvania’s Partnership Act determines the rights of the partners. For example, if no writing is in place, then profits are shared equally between partners and losses are shared in the same manner as profits. This means if one partner has contributed significant money toward the partnership and the other has not, each partner will share equally in the profits, regardless of how unfair this might appear. The good news is that there is a lot of flexibility in creating Partnership Agreements to carry out the intention of the parties.