Legal, Social and Economic Issues With Opening a Partnership
- A partnership refers to a business owned and operated by two or more individuals. Each partner acts as an agent of the business holds the ability to obligate the company in legal contracts. Various forms of partnerships exist, including general partnerships and limited partnerships. General partnerships exist when all partners hold the same responsibility and exercise the same involvement with the business. Limited partnerships exist when one or more partners limit their involvement with the business to a financial contribution only. A limited partnership must include at least one general partner.
- New partnerships face a variety of legal issues that the partners need to discuss and agree upon. These include registering the business name, drafting a partnership agreement and obtaining any required business licenses or permits. The partners need to discuss potential business names and one that the group likes. The group needs to research the name choice to determine if another business already exists with the same name. If the name is available, the group needs to register the name with the state. The group also needs to create a partnership agreement that itemizes the duties of each partner and the method that the group plans to use to distribute its earnings. The business also needs to apply for a business license and any applicable permits to operate in the area. An attorney can assist the group with the legal paperwork.
- When friends form a business partnership, the dynamic of the relationships changes. Previously accepted social norms, such as joking about financial matters or skipping work to play golf, create a strain when others depend on that partner to maintain his responsibilities with the business. These friends need to outline the responsibilities and draw clear boundaries between work and socializing before opening for business.
- The partners need to address economic issues before opening for business. These issues include deciding which bank to work with for opening a bank account and which partners can access the account. The partners also need to consider if they want to obtain financing to start up the business and how much financial resources it requires. Finally, the partners need to determine how to split up any profits or losses between them.
