Starting your own business can be an exciting new adventure. When you sign on with a partner, however, it's important to have a partnership agreement in place to protect yourself and your business. But how do you know which one is right for you?

Three main types of partnership agreements

Generally, there are three agreements available for business owners. They are:

• General partnership (GP)
• Limited partnership (LP)
• Limited liability partnership (LLP)

Each type comes with its own benefits. Determining which one is the best fit for you can help foster a strong and successful business.

General partnership

A general partnership involves an agreement with you and anyone who has signed on as a general partner. This means that your partner has a shared responsibility for your business. They can act on behalf of the business and essentially have the same authority and power to run the business as you have.

A general partnership thus binds you and your partners to an agreement that holds everyone accountable for the welfare of the business. Each party included in a GP retains basic business decision-making powers. A GP also holds both you and your partner responsible for all business liabilities.

Limited partnership

A limited partnership usually involves at least one general partner and one limited partner. A limited partner does not participate in day-to-day business management. An LP therefore limits a partner's involvement in your business. The general partner will maintain control over the business, while the limited partner who signs an LP might only be interested in investing money and receiving a share of the profits.

Limited liability partnership

In a limited liability partnership, all partnership members are able to manage the company. The difference, however, is that each partner is only held accountable for business liabilities up to the amount they invested. An LLP holds each party personally responsible for any errors or misconduct without penalizing the other partners.

Assess your business needs

Knowing the different types of partnerships can help you decide which method will best protect your business. With the right partnership, you can develop a strategic plan for your business that will promote growth and stability for years to come.