Forming a Business Partnership – Important Facts You Must Know
Forming a Business Partnership is often one of the most important steps that entrepreneurs face. A general partnership is simply the conventional definition of a business partnership and it’s when both parties are equally financially responsible for the day-to-day management of the business, its assets, liabilities, expenses, and debts – and even capital. It doesn’t matter if you’re working alone or with others, a general partnership makes sense for many types of businesses. So what exactly are the things to consider when forming a partnership?
One thing to consider is whether to hire an attorney. An attorney can help fill in the legal forms and give advice about how the agreement should be drafted and when to file. He can also help with setting up meetings between partners and discuss key points. You don’t want to hire an attorney if the cost will be excessive and only a liability to your business. There are a number of business firms that offer affordable fee-based services for attorneys.
Another option to consider when structuring your partnership is to establish a general partnership or a limited liability partnership (LLP). Both allow partners to share in business income, use their personal assets, and write-offs and dividends. However, a partnership will only have one level of taxation, whereas a LLC has two different tax rates. The limited liability partnership also limits partners’ liability, while a general partnership allows everyone to be individually responsible for their business income. Limited liability partnerships often have less paperwork and can be set up quickly and easily.
When considering the pros and cons of business partnerships, you also need to understand that there are some inherent drawbacks to forming them. One of those drawbacks is that they are more difficult to file. Because of this, most new ventures and later growing businesses opt for the simplicity and streamlined process of incorporation. Forming a corporation requires going through long meetings and expensive legal fees. Additionally, many rules and regulations regarding corporation and limited liability partnerships are being tightened as businesses try to stay ahead of the ever-changing federal tax laws. It may be a good idea to consider incorporating sooner rather than later. These auctions, via sites such as Boat Parts are also available online.
A potential pitfall of forming a business partnership is that partners usually control each other. Because of this potential conflict of interest, it may not be in your best interest to form a partnership without carefully considering all of the other partners involved. Some of these considerations are how much each partner will contribute to the partnership, what the partnership will do, how the partners will share assets, what the partners will do for their vehicles, etc. If you have any doubts about what to include in the agreement, it is advisable to consult with an attorney, a Certified Public Accountant, or a business professional who can provide advice on the matter. You can also make a list of questions that you would like answers to before forming the partnership.
Forming a business partnership is a good way to build long-term business partnerships that have the potential to grow. There are many steps that must be taken to successfully incorporate a new company. However, the benefits can be enormous if done correctly. Always consult with an attorney that can give sound professional advice on the matter.