What Happens When You Form A Partnership?
In a partnership two or more people come together to form a new business for the same end result. Partners can contribute money, but they can also contribute industry/business experience. All partners in a partnership act towards the same agreed upon goal, share the profit and losses in an agreed upon share. Each partner is legally responsible for both his/her own actions , and the actions of other partner’s in the business. The actions and statements any partner makes to third parties is considered a promise made by all the partners.
Registering for a partnership is simple. To , each partner must agree to conduct business with the other partners.
Why Create A Partnership?
Partnerships can be better than sole proprietorships for several reasons. A Partnership gives more freedom for business owners who share business tasks and gives them the potential to earn higher profits. The big advantages of a partnership include:
- Partnership formations are easy and don’t cost a lot of money to establish.
- Each Partner works and profits as agreed to in the terms and conditions.
- Partnerships let you combine your resources with the other partners, so you have more operating capital.
- If an emergency or illness requires one partner to take a break from the business, the other partners can keep the business going.
- Several partners sharing the same tasks can often mean less work for each person.
- Fairly easy to recover your investment share and dissolve the partnership.
Forming a Partnership:
To create a partnership, you must go through a lengthy process to make it legally authorized. This process should include:
- Discuss the business details face to face with all your partner(s). Discuss and agree on the goals and objective of the business, what products and services you will offer, where to operate the business and the role of each business partner in growing the business.
- Decide what kind of partnership is best for the business.
- After deciding on the type of partnership, your next step will be getting an EIN (or Employer Identification Number) that you and your partners will use with the business. That I.D. is needed for you to open bank accounts in the name of the business, pay employees, and register with the state where you will operate.
- Write the partnership agreement.
- Register your business partnership, listing all owners. This is done by filing your business license in the state you will conduct business.