By definition, a partnership is a business with more than just one person or one owner running it. A partnership refers to businesses with owners who have not filed legalities to become a limited liability company or LLC.
If you’re planning to enter a business venture with another person but you guys don’t want to make it a corporation, you need to know the basics of partnership.
There are two types of partnerships: general and limited. General partnerships are very common compared to limited partnerships.
Business based on partnership guarantees simple and inexpensive structure to manage it.
Although it is a ‘partnership’, there is personal liability for all owners. That means everyone is personally liable for business debts or business obligations. It also means if you and your partners fail to pay the creditor, you and your partner’s assets will be seized according to court rulings.
Taxes for business partnerships is what the IRS calls as pass through entity. Taxes will not be paid as partners; it will be paid individually.
When creating a partnership for your business, you and your partners are not required to go through the difficult and serious paper works. What you need to comply are the following: local registration, pay the minimum tax, IRS employer identification number, state issued seller license, and the zoning permit.
If you wish to end a partnership, remember that the partnership usually dissolves when it becomes tricky and one partner wants to leave the business. This is one of its greatest disadvantages.
That’s why before you enter a partnership and before you sign the partnership agreement, get a lawyer. Not only does a credible lawyer capable of protecting you and your assets from bad decisions, he or she will also help you straighten the creases.
So if you’re thinking of getting into a business partnership, hire a lawyer right now.