Checklist: Starting a Partnership
So, you've decided to start a partnership with one or more trusted professionals. While partnerships are easier than corporations and limited liability companies (LLCs) to set up, they still require some effort to get off the ground. The stakes are quite high, since 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 the profit and it's written into the agreement, you may have little or no recourse if your partner ends up doing just 20 percent of the work.
A with any business structure, you will need to choose and register a business name and obtain all necessary business licenses and permits. If you are thinking of starting a partnership, below is a checklist of steps to take before you open for business. Keep in mind that your partnership's start-up requirements might vary from the list below, depending on the specific type of business you are in, and where your business is located.
__1. Decide on a Business Name
When choosing a name for your partnership, you may decide to use the names of the partners (as many law firms do, for example) or go with something more descriptive of the business. You also may choose a fictitious business name (or "DBA") under which to advertise and promote the partnership.
__2. Search Availability
Make sure the chosen business name of your partnership is in fact available before you go any further. Also, look for similarity to existing names (which can cause confusion or present image problems).
__3. Register your Partnership Name
Once you've settled on a name and have determined through a search that it is not taken 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 partnership agreement is a very important document in the formation of a partnership, as it outlines the terms and responsibilities that affect each partner. The agreement will include the name of your business, the contributions of each partner (duties and responsibilities), how profit and loss will be allocated, the authority and decision-making powers of the partners, and other important terms.
__5. Register your Partnership
You also must register your partnership by filing a "certificate" or "registration" of partnership with the Secretary of State office. This step is required most often 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 fully within the law, your partnership must adhere to all permitting and licensure requirements. For instance, a law firm organized as a partnership must ensure that each partner is a liensed attorney.
__7. Get Help From a Business Organizations Attorney
Forming a partnership can be a long-term benefit to your new business in the long run, but the process -- most notably drafting a comprehensive partnership agreement -- can be quite complicated. To ensure that your new partnership covers all legal bases and has the best chance for success before opening the doors, you may wish to consult a professional. Contact a small business attorney in your area today.