Joining or Leaving a Partnership Requires the Assistance of an Experienced Attorney. Let L4SB Help You Quickly!
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.
Steps to take when leaving or dissolving a partnership:
- Review the agreement in order to follow the dissolution protocol.
- Discuss the fact that you want to leave or dissolve the partnership with your partner, here you can start to chat about the debts, liabilities and how to end things.
- File a dissolution of partnership form to announce the end of the partnership formally.
- Notify your employees, customers, landlord, government entities, etc.
- Settle and close all accounts, bank accounts, and pay up all your debts, and then distribute all assets as per the agreement.
To ensure you’re upholding your legal obligations for both joining and leaving a partnership, it’s a good idea to consult with an experienced business attorney. An attorney will help you navigate your way through any specific rules for start-up and dissolution.
How Law 4 Small Business Can Help
Law 4 Small Business has a Join or Leave a Partnership plan which has many valuable benefits with regards to partnerships. Your matter will be handled by an experienced business transaction attorney who will: do a 1-pass review and edit of your closing documents, check for logical consistency and fit with your expectations, identify and easily list any issues, offer 15 minutes of free Q&A.
Additional add-ons to the Join or Leave a Partnership plan include 24-hour turnaround service and other legal services. If you’re interested, find out more by click on the button at the top right.
