Start Your Partnership Off on the Right Foot
Starting a new business is exciting. You will be able to set your own work schedule, be your own boss, and work with only people you choose. When entering a business partnership, it may seem like having documentation in place for you and your partner is an unnecessary expense. However, that excitement that you are building your business with may quickly change if there is a dispute about the direction that the business should go or some other issue. Creating a business partnership, and putting the details in writing, is a great way to set rules in motion that will protect not only you, but all parties when the inevitable dispute arises.
When entering a business partnership, it is best to know what all options are when creating your partnership. Below is a brief review of the types of partnerships available, but you should always speak to your attorney to find out which type is best for you.
- General Partnership – This type of partnership is a business arrangement that involves two or more people agreeing to share all assets, financial and legal liabilities, and profits of a joined business. In some situations, this type of partnership can be entered into unintentionally. For example, becoming a co-owner of a business with the intent of making a profit automatically enters you into a default partnership.
- Limited Partnership – If your business involves investors, this type of partnership may be your best option. It requires filing a partnership with the state and having two types of partners – limited and general. Limited partners are similar to the partners in a general partnership and are typically involved in the everyday operations of the business. Limited partners are usually investors that share profits and contribute capital but are rarely involved in the day to day operation of the business. These partners are also limited in their liability and are usually only liable for the debts in the amount they have invested. A limited partnership can, and in most cases should, file a “limited liability limited partnership” election, or LLLP election.
- Limited Liability Partnership or LLP – This type of partnership shouldn’t be confused with an LLC. It is a partnership that is typically formed by licensed professionals such as accountants, attorneys, architects, or medical practitioners. These are governed similar to general partnerships except each partner is liable for their own actions within the company. Other types of businesses can form LLPs, although it is rare for them to do so.
Having a partnership agreement in place is vital for creating a sound business plan among a group of people. While these documents are not required by law, they are vital to the structure of your business and provide a clear roadmap of how the business will be operated and shared. An agreement can develop a hierarchy for decision making, outline what would happen if a partner dies or decides to leave the company, and many other important issues that often arise during the operation of a business.
Contact a Florida Business Planning Attorney Today
If you are starting a business with a partner, even one that you’ve known for years, save yourself a headache and plan ahead for all potential problems by ensuring that your company has the right documents in place. Contact Tampa business transaction & formation attorney David Toback today to schedule a consultation.