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Business Law
- Partnership Agreements
Did You Know?
It is estimated that there are 1,758,000 partnerships in the U.S. that account for more than 1.14 billion dollars a year in business (Bizstats)
A partnership is a business owned by two or more people that hasn't filed papers to become a corporation or a limited liability company (LLC). You don't have to complete any paperwork to create your partnership -- the arrangement begins as soon as you start a business with another person.
Attorneys listed in this practice area typically assist individuals and businesses who are seeking legal representation concerning all aspects of partnership law, from formations and venture capital financing to drafting business agreements and internal forms. In addition, attorneys in this practice area also typically provide assistance in litigation, as well as consultation on tax and compliance issues.
Although the law doesn't require it, many partners work out the details of how they will manage their business in a written partnership agreement. If you don't create a written agreement, the partnership laws of your state will govern your partnership.
Many states have adopted the Uniform Partnership Act. A partner relationship is generally the result of a contract either expressed or implied with no formal requirements (such as a signed document).
To determine whether a partnership exists courts look at:
• Intention of the parties
• Sharing of profits and losses
• Joint administration and control of business operation
• Capital investment by each partner
• Common ownership of property
Under state agency law, partners are personally liable for torts committed by the partnership and its agents This is not the case of a limited partnership where one or more general partners manage business operations and assume personally liable for partnership debts while other contributing/profit sharing partners take no part in running the business and incur no liability beyond contribution obligations.
Partnerships Responsibilities
Unlike corporations, partnerships are relatively informal business structures. Partnerships aren't required to hold meetings, prepare minutes, elect officers, or issue stock certificates. Generally, partners share equally in the management of the partnership and its profits and losses, and assume equal responsibility for its debts and liabilities. These and other details are typically described in a partnership agreement.
Partnership Taxes
A partnership is not considered separate from its partners for tax purposes. This means the partnership itself does not pay any income taxes; instead, partnership income "passes through" the business to each partner, who then reports his or her share of business profits or losses on an individual federal tax return. Each partner will need to estimate the taxes he or she will owe at the end of the year and make four quarterly estimated tax payments to the IRS.
Starting a business can be overwhelming. There are so many practical and legal decisions to make. Perhaps you already have an ongoing business but now you are thinking about incorporating. Consulting a lawyer can help you make proper decisions and get the work done.
Difference Between General Partnerships and a Limited Partnerships
General Partnerships is where all partners participate to some extent in the day-to-day management of the business.
Limited Partnerships are very different from general partnerships, and are usually set up by companies that invest money in other businesses or real estate. Limited Partnerships have at least one general partner who controls the company's day-to-day operations and is personally liable for business debts, they also have passive partners called limited partners. Limited partners contribute capital to the business (investment money) but have minimal control over daily business decisions or operations. In return for giving up management power, a limited partner's personal liability is capped at the amount of his or her investment.
CONTACT A PARTNERSHIP ATTORNEY IN YOUR AREA
Always consult a lawyer with experience in setting up limited partnerships if you're interested in creating this type of business. If you are in need of legal advice or services, or simply wish to speak to an attorney who has successfully handled Partnership agreements in your state, you may use this Free Online Consultation Form.
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