Therefore, you have decided start a partnership with one or more trusted professionals. Although partnerships are easier to establish than corporations and limited liability companies (LLC), they still require some effort to get off the ground. The stakes are quite high, as the partnership agreement will stipulate how the business is managed and each partner’s financial stake in the operation. If you and your partner agree on a 50/50 split of earnings and your partner enters into the agreement, you may have little or no recourse if your partner ends up doing only 20 percent of the work.
Steps to establish an association
With any business structure, you will have to choose and register a business name and obtain all necessary business licenses and permits. If you are considering starting a partnership, here is a checklist of steps to take before opening an account. Please note that your association startup requirements may vary from the list below, depending on the specific type of business you are in and the location of your business.
1. Choose a company name
When choosing a name for your partnership, you can decide to use the names of the partners (like many law firms, for example) or go with something more descriptive of the business. You can also choose a fictitious business name (or “DBA”) under which to advertise and promote the association.
2. Search availability
Make sure the name of your company’s chosen business is available before proceeding further. Also, look for similarity to existing names (which can cause confusion or present image problems).
3. Register your company name
Once you’ve settled on a name and determined through a search that it’s not taken over by another entity, it’s time to register it. (including any fictitious business names you decide to use).
4. Create and sign a written partnership agreement
The association agreement It is a very important document in the formation of an association, since it describes the terms and responsibilities that affect each partner. The agreement will include the name of your company, the contributions of each partner (rights and responsibilities), how the gains and losses will be distributed, the authority and decision-making powers of the partners, and other important terms.
5. Register your company
You must also register your association by filing a “certificate” or “registration” of association with the Secretary of State’s office. This step is required more frequently for limited liability partnerships (LLPs) and limited partnerships, as opposed to general partnerships (learn more about types of partnerships).
6. Obtain business licenses and permits
In order to operate within the law, your company must meet all permitting and licensing requirements. For example, a law firm organized as a partnership must ensure that each partner is a prosecuted attorney.
Forming a partnership can be a long-term benefit to a business, the hardest part is drafting a comprehensive partnership agreement. To ensure that your new partnership covers all legal bases and has the best chance of success before opening the doors, you can consult a professional. Contact a small business attorney in your area to find out how they can help you plan a successful partnership.