1.6 WASHINGTON GENERAL OR LIMITED PARTNERSHIP
A foreign corporation that is a partner in a U.S. partnership is considered as being engaged in any U.S. business in which the partnership is engaged. In addition, the Branch Profits Tax may apply to the foreign corporation. The primary advantage of doing business through a partnership rather than a corporation generally is that it avoids double taxation at the corporate and shareholder levels. The partnership itself is not subject to U.S. taxes; instead, the tax liability is passed through to each of the partners. However, the U.S. Branch Profits Tax may largely eliminate this benefit for foreign corporations that are partners in partnerships doing business in the U.S.
The primary disadvantage of a partnership is the liability of some or all of the owners. For example, in a Washington general partnership, all partners are fully liable for all debts and obligations of the partnership (unlike a corporation where the shareholders have no such liability). In a Washington limited partnership, there must be at least one general partner who has full liability, but the remaining “limited partners” will not be liable beyond the amount of their investment so long as they do not participate in the day-to-day management of the limited partnership’s business.
Some commercial real estate projects may be structured as limited partnerships, with the developer serving as the managing general partner and the investors serving as limited partners. The Washington limited partnership statute does not impose liability on the limited partners for debts and obligations of the partnership, even if the limited partners participate in management decisions of the partnership. Furthermore, a limited partnership may elect to be treated as a “limited liability limited partnership” or “LLLP,” in which case no partner, whether general or limited, generally would be liable for the debts and obligations of the partnership.
The primary disadvantage of a partnership is the liability of some or all of the owners. For example, in a Washington general partnership, all partners are fully liable for all debts and obligations of the partnership (unlike a corporation where the shareholders have no such liability). In a Washington limited partnership, there must be at least one general partner who has full liability, but the remaining “limited partners” will not be liable beyond the amount of their investment so long as they do not participate in the day-to-day management of the limited partnership’s business.
Some commercial real estate projects may be structured as limited partnerships, with the developer serving as the managing general partner and the investors serving as limited partners. The Washington limited partnership statute does not impose liability on the limited partners for debts and obligations of the partnership, even if the limited partners participate in management decisions of the partnership. Furthermore, a limited partnership may elect to be treated as a “limited liability limited partnership” or “LLLP,” in which case no partner, whether general or limited, generally would be liable for the debts and obligations of the partnership.