If you have a small business and want to take on more employees, chances are you've thought of also taking on a partner to not only share in the management responsibilities but share in the profits as well. But how do you go about forming a partnership? Is there a lot of paperwork or is the process relatively easy? But more importantly, is a partnership right for you?
There are three different types of partnerships from which you can choose: general, limited or joint venture. We'll be focusing today on the most common, a general partnership.
It's important to point out that although general partnerships are the easiest type of business relationships to form, they can also be one of the most difficult to manage and to dissolve. It's important then to choose your partner carefully, and when possible, enter into a partnership with a written document that outlines the behavior of all parties involved.
As pessimistic as this may sound, thinking about going bankrupt early may save you a huge headache down the road. You and your partner will share equal authority to bind the partnership to business deals and debt obligations. And because you are not protected by a limited liability company (LLC), if your business goes bankrupt and cannot pay off its debt, then creditors can go after the partners' personal assets, including bank accounts, cars and homes.
Exiting a partnership can be as easy as giving express notice of leaving, to as complicated as the litigation processes. Generally speaking, having a written agreement is situations such as this usually makes the process easier to navigate because it can outline the process that needs to be followed. However, it's important to point out that not all terminations of partnerships are that easy and sometimes it may be necessary to get the advice from a business law attorney.
So is a partnership right for you? If you're still not sure, speaking with a skilled business and commercial law attorney may be helpful before making a major business decision such as this.
Source: FindLaw.com, "The Small Business Partnership: General and Limited Partnerships"