Join or Leave a Partnership

Make Sure You Consult an Attorney Before Joining or Leaving a Partnership.

If you’re looking for more capital to get your dream business started or are already working with your best friend on a handmade project that has just become lucrative, then it’s time you looked at creating a formal partnership.

General partnerships can be quite informal business relationships, and you actually don’t even need anything in writing to form a partnership. The key factors that make up a partnership are two or more people carrying on as co-owners and sharing profits. Even if a ‘partnership’ wasn’t your intention, if this is what is happening your relationship will be deemed a partnership and all partners will be liable for the obligations of a partnership.

And, although, there is no requirement for a written partnership agreement, it’s an excellent idea to have one. It will prevent any possible disagreements about profit or vision and instead give your partnership a solid direction and focus.

Joining a Partnership

As mentioned above, it’s just good business to create a written agreement with your partner, so you don’t run into any future problems. Make sure you cover all major business issues in writing.

Creating the Agreement

First of all, brush up on your state’s laws with regards to creating partnerships and then try and be as specific and as detailed as possible. Make sure to include: the name of the partnership; capital, investments, and profit and losses; roles; resolution of disputes; and survivorship.

Advantages

• A partnership is easy to establish and raising funds may be easier with more owners;
• The profits go straight to the partners, this makes tax reporting easier;
• Partners combine their individual talents and complement each other – creating a strong team;
• Often employees are able to work towards becoming a partner, and this can be attractive.

Personal Liability

Partners are personally liable for business obligations, so if the partnership can’t afford to pay creditors, the partners themselves are individually responsible for paying the debts. Debts of the partnership will expose your personal assets to liability unless you’re a limited partner. And, taxes are paid through the personal income tax filing of the individual partners.

Leaving a Partnership

What do you do when things don’t work out? Leaving can be a tricky thing, and that’s why it’s so important to have an agreement in place – to mitigate the risks of a tarnished relationship, a failed venture, and a potential lawsuit.

The Process

It’s not as easy as just closing your doors, and some things will need to be wrapped up. Number one on the list is settling debts, as well as terminating the legal existence of the business, and distributing the remaining assets

The Law 4 Small Business service to assist in joining or leaving a Partnership requires specific Attorney care and attention with billable hours. Since no two matters are the same when it comes to these issues, please call us today to speak with an Attorney and get the expertise you need to proceed.