Starting your own business can be personally rewarding, but sometimes it’s better to work in a team.
Defining a Partnership
A business established with two or more people is called a partnership. Partnerships are unincorporated business entities with the shared responsibility of the business distributed equally between each partner. Each partner contributes to all aspects of the business; everyone shares in the profits and losses of the company.
There are different types of partnerships:
Partnerships help establish roles and responsibilities, and don’t take much money to establish. This is why partnerships are popular business entities.
How to File a Partnership Application
Partnership applications must be registered at the County Clerk’s office or Secretary of State’s office, respectively.
In most cases, you’ll have to claim a business name if you wish to use a name that differs from your given name or the names of other partners. A fictitious business name, sometimes called a DBA, is what you’ll need to establish a new business name.
Then you’ll need to apply for an employer identification number (EIN), or federal tax ID, which will allow you to carry out common business dealings in the name of the company instead of individual partner names.
Once the business is registered, you’ll also need to obtain any licenses or permits required by your state or local government. These can vary from state to state, so check with the clerk’s office to ensure you’ve covered all your bases.
It’s easy to file a partnership application, so don’t wait if you’re starting a business with friends or colleagues.
Just as there are different types of partnerships: General, Limited and Joint Venture, there are different types of partners. These partner types are not exclusive to individual partnerships, but also exist to differing extents in some or all varieties of partnerships. The three recognized types of partners are these:
Equity and salaried partners differ in that equity partners usually have shares in company ownership; whereas, salaried partners function as paid employees.
Partners based on position exist in situations where one partner has a more senior role than another: managing partner, senior partners, junior partners and associate partners, for example. Each role has a different level of input, responsibility and investment as well as different day-to-day duties in the company.
General and limited partners take an active role in managing the business and are liable for the debts incurred by the partnership. Limited partners invest money in the partnership but are not active participants in the management process.
Partners can join the business at any stage. They may be there from the start or join after the business is up and running or anywhere in between. The key is investment. All incoming partners are required to bring some type of capital to the business. What that capital is and how much plays a determining role in that partners share of the businesses profits and losses each year.
Once you have identified the type of partnership and partner roles that best suits your business needs, you’ll need to make it legal with the following actions:
GovDocFiling offers an easy process for getting your business partnership off the ground here.