Business Partnerships Lawyer in California
Partnerships are a very popular business entity because they tend to be very informal. There are about 700,000 partnerships in the US, and possibly many more unregistered partnerships whose owners are not even aware that they are in a partnership. A partnership is “an association of two or more persons or entities carrying on as co-owners of a business for profit”. The main difference between the sole proprietorship and the partnership is that in a partnership there are two or more co-owners who are managing the business and working together to make money. The partners can be individuals, other entity forms (such as corporations, LLCs etc), or a mixture of individuals and entities.
Partnerships, like a sole proprietorship, do not require any filings with the secretary of state and therefore is much easier to form that a corporation, LLCs, or a limited partnerships. Most people are very surprised to learn that nothing needs to be done to form a partnership – it automatically springs into existence when two or more people start doing business together as co-owners.
Partnership is a separate entity from the partners and typically holds all assets in its own name. Ownership in a partnership is typically easier to transfer than the ownership in a sole proprietorship. However, there may be restrictions imposed by the partners themselves who, due to the close knit nature of a partnership business, may not want to permit the sale or transfer of ownership to a stranger.
Each partner is an agent of the partnership and can act on behalf of the partnership. This means that each partner can bind the partnership by entering into contracts, taking loans, or filing taxes, unless the person with whom the partner is dealing knows that the partner is exceeding his powers. The ability of the partners to act as agents for the partnership is good because it often permits the partnership to operate more efficiently by having co-owners attend to its business, and bad because each partner can create personal liability for the other partners. One of the main disadvantages of a partnership is that it does not provide for limited liability, and each partner is personally liable for the full extent of all debts and judgments against the partnership regardless of which partner incurred the liabilities on behalf of the partnership.
One of the main advantages of a partnership is that it is informal, created automatically and does not have to follow a lot of formalities. However, smart business partners typically retain an attorney to draft a comprehensive Partnership Agreement which is a contract that governs the relations between partners and covers crucial topics such initial and additional contributions to the partnership, voting powers, profit and loss distribution, management powers and responsibilities, and transferability of partnership interests. Many partnerships fail due to a dispute between partners over an issue that was not addressed and put in writing at the inception of the business. It is much easier to set the rules at the beginning of the game and to follow them than to try to agree on rules in mid-game among disagreements, misunderstandings, and hurt feelings. In absence of a Partnership Agreement, partnership issues are decided in accordance with partnership statutes and case law which provide basic default partnership rules. Other than entering into a Partnership Agreement, a partnership does not have to follow a lot of the formalities typically necessary with more associated with more complex business entities, but it must conscientiously follow all registration, licensing, safety, permit and tax laws to keep their business in good standing.
Partnerships can be a good business entity for some clients who need an informal and low cost business structure, and are able to partially shield themselves from liability through insurance.
Business Partnership Lawyer San Francisco
Our San Francisco business partnership laywers serve the entire California Bay Area. The Zurada Law Group is just a phone call away. We are experienced business partnership lawyers in California.
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