Choosing a Business Form 233its partners. As will be seen, especially in the areas of liability and taxation, part-
nerships are very much collections of individuals, not separate entities.
Ownership of partnership property is a particularly problematic area. All
partners own an interest in the partnership, which entitles them to distributions of
profit, much like stock in a corporation. This interest is the separate property of
each partner and is attachable by the individual creditors of a partner in the form
of a “charging order.” Each partner also owns the assets of the partnership jointly
with his other partners. This form of ownership (similar to joint ownership of a
family home by two spouses) is called tenancy in partnership. Each partner may
use partnership assets only for the benefit of the partnership’s business; such assets
are exempt from attachment by the creditors of an individual partner, although not
from the creditors of the partnership. Tenancy in partnership also implies that, in
most cases of dissolution of a partnership, the ownership of partnership assets de-
volves to the remaining partners, to the exclusion of the partner who leaves in vio-
lation of the partnership agreement or dies. The former partner is left only with
the right to a dissolution distribution in respect of her partnership interest.
RECOGNITION OF CORPORATIONS AND LIMITED
LIABILITY COMPANIES AS LEGAL ENTITIES
The corporation and LLC are our first full-f ledged separate legal entities.
Ownership of business assets is vested solely in the corporation or LLC as a
separate legal entity. The corporation or LLC itself is plaintiff or defendant in
suits and is the legally contracting party in all its transactions. Stockholders and
members own only their stock or membership interests and have no direct
ownership rights in the business’s assets.
RECOGNITION OF LIMITED PARTNERSHIPS AS
A LEGAL ENTITY
The limited partnership, as a hybrid, is a little of both partnership and corpo-
ration. The general partners own the partnership’s property as tenants in part-
nership operating in the same manner as partners in a general partnership. The
limited partners, however, have only their partnership interests and no direct
ownership of the partnership’s property. This is logically consistent with their
roles as silent investors. If they directly owned partnership property, they
would have to be consulted with regard to its use.
CONTINUITY OF LIFE
The issue of continuity of life is one which should concern most entrepreneurs,
because it can affect their ability to sell the business as a unit when it comes