However, it is a risk that could potentially come with some big rewards. One method of reducing that risk is by forming the business with a partner. Of course, in some cases a business partnership is inevitable if two or more people came up with the business idea. No matter how it happens, a business partnership is when two or more people invest their money in a business, thus sharing in the profits and losses.
There are many different types of business partnerships and a lawyer is necessary in finalizing each of them. That is because there can be complicated legal issues when more than one person owns a business. There may be concerns over how the ownership is distributed, how profits are split, and what happens if one of the partners leaves. A business lawyer can settle any disputes that arise and help to prevent any issues from occurring in the first place. If you live in central Florida and are about to start a business partnership, then contact an Orlando business attorney to get the help and advice you need.
The Types of Business Partners
Business partners can be individuals, groups, companies, or corporations. There can be general partners who participate in the day to day running of the business and have liability for partnership debts and obligations. There can also be limited partners who invest in the business but are not involved in running it. A business can also have different levels of partnership since there can be junior or senior partners. They will have different duties and responsibilities based on their partnership level.
The Types of Business Partnerships
If you are starting a business partnership, then it is important to know just what kind of partnership is being set up. The following are the three different types of business partnerships:
General Partnership - This is when the partners take part in the general operations of the business and share in the liability of debts and lawsuits.
Limited Partnership - This is when a business is managed by one or more general partners who take liability for any business decisions. But there are also limited partners who do not take part in business operations and who do not have any liability.
Limited Liability Partnership (LLP) - This gives all of the partners legal protection from liability. This type of partnership protects the partners from liability from the actions of the other partners. An LLP is usually formed when all of the partners are from the same professional category, such as architecture or the law.
How a Partnership Works
A partnership is different from a corporation in that it is not a separate legal entity from the owners. That means the business is not separate from the owners when it comes to liability. When it comes to taxes, each partner pays their own individual income tax after the profits and losses have been divided amongst them.
Creating a Partnership
Business partnerships are usually registered in the state or states where the business is located, however, the partnership agreement between the partners is not generally registered with the state. The partnership agreement clarifies the relationship between the partners and determines their roles and responsibilities within the business, the profit sharing agreement, the contributions they will make to the business, and so on.
The partnership agreement also has to consider possible future scenarios and their ramifications. For example, there should be a plan for what happens if a partner decides to leave the business.
Consult an Attorney Before Starting a Business Partnership
The formation of a business partnership can be a complicated process, which is why the partners should get a business attorney to help them. The attorney can draft agreements laying out the relationship amongst the partners so that everyone knows what their duties and obligations are. An attorney can also help if any disputes arise between the partners or from any other source. So if you are interested in forming a business partnership, make sure that you and your partners consult a business lawyer first.