American real estate partnerships make sense when developing property, be it residential or commercial real estate. Not only do American real estate partnerships protect partners from liability, but they also allow an efficient mechanism for profit sharing. In doing so, American real estate partnerships incentivize property sharing.
How do American real estate partnerships protect real estate developers from liability? If a developer acts as a sole proprietor, any legal action against his business is against him personally. Thus, his assets are directly affected by any suit, as well as other significant factors, such as his credit score.
American real estate partnerships solve this. Liability is divided evenly amongst the partners according to ownership share, ensuring that no one partner is on the hook for too much. In fact, if one partner is a corporation, an American real estate partnership can be structured in a way so that the corporation is sued, leaving no liability for the partners themselves.
Of course, a partnership has attractive tax consequences. Typically, partnerships only have to pay personal taxes on their profits. This is much better than corporate taxes on top of any personal income taxes from a salary. This makes American real estate partnerships especially attractive to developers.