If you want to start a business in New York with one or more partners, you must decide what sort of legal entity to form. There are several different ways you may organize a business that has two or more partners.
According to the New York Division of Small Business and Technology Development, the state recognizes three different types of partnerships: general, limited and limited liability.
The simplest option if you want to own and operate a business with another person (or other people) is to form a general partnership. In this type of business organization, all the partners participate in the daily operations of the business, and they all contribute financially. They all assume the risks and liabilities for the entire partnership. Even if your partner’s sole actions accrue debt for the business, you have personal responsibility for that debt based on the partnership structure.
If you want to create a business with a “silent partner” you could form a limited partnership. In this situation, you would take responsibility for the daily management of the business, and your limited partner would contribute capital. As in a general partnership, you maintain personal liability for the business, and the limited partner is partially liable as well. A limited partner’s capital investment determines the extent of his or her personal liability. In general and limited partnerships, all partners include business income on their personal tax returns.
Limited liability partnership
If you and your partners are professionals in certain industries, such as attorneys, CPAs or architects, you may choose to create a limited liability partnership. In an LLP, each partner is only liable for his or her own professional conduct; for example, you would not be liable for your partner’s professional negligence or malpractice.