Sacramento Businesses – Partnerships
A Partnership is an agreement between two or more individuals to carry on as co-owners of a business for profit. There are no legal filing requirements or specific documents to form a partnership. A mere agreement will suffice and automatically create a partnership.
Here are some of the advantages and disadvantages of forming a partnership:
- Minimal Formalities. Partnerships are not required to elect officers, hold regular meetings, draft corporate and meeting minutes, or issue stock or membership certificates.
- Easy Setup. Partnerships can be created with an informal agreement to start a business. There are no formal filing requirements.
- Split Profits. A partnership will automatically form equal shares in management, profits and losses, and debts and liabilities of the business. However, if this type of structure is not what you desire, the partnership can draft a partnership agreement to opt out of the standard rules.
- Taxes. Partnership are considered pass-through entities. Therefore, the partnership itself does not pay taxes on the income. The income passes through to the owners of the business and they are taxed individually. Compared to corporations, this creates a simple taxing structure.
- Personal Liability. The owners of a partnership are personally liable for all debts and actions of the business.
- Your house, your car, and your bank account, could all be taken from you if something bad happens.
- No Formalities. A lack of formalities can create a lack of organizational structure.
A partnership agreement is not required, but highly recommended. If no partnership agreement is drafted, you will automatically fall into the default rules and your state’s laws will govern your business relationship. A partnership agreement should clearly state each parties intentions with the business, and this will reduce any arguments that may form in the future. These agreements help establish roles for the partners and understandings of each others expectations. Contact our Sacramento business attorneys for help in drafting your partnership agreement.
What happens if a partner decides to leave the business? This can create a legal nightmare if this situation is not dealt with in advance. A buy-sell agreement establishes an option for one partner to buy out the other partner if they want to leave the business. This establishes written, agreed-to in advance, rules that make departures smooth. Contact us for help in drafting your buy-sell agreement.
Types of Partnerships
- General Partnership;
- Limited Partnership; and,
- Limited Liability Partnership.
Services Provided by Sacramento’s Business Attorneys:
- Partnership Agreements;
- Federal Employer Identification Number;
- Advice on Day-to-Day Operations;
- Contract Drafting;
- Buy-Sell Agreements; and,
These are only some of the advantages and disadvantages with a partnership. Give our Sacramento Business Attorneys a call to schedule an initial consultation and let us help!