San Diego business attorneys at Gehres Law Library will help you to determine if you should form a partnership and will guide you through the partnership formation process. Give us a call if you are considering organizing your business entity as a partnership.
Steps to Take Before Forming a Partnership
A partnership is one of several options to structure a business entity. Partnerships are an alternative to Limited Liability Companies (LLCs) and corporations. If you are considering starting a partnership:
- Determine if a partnership is the right business structure. Corporations and LLCs can provide broader protection from liability for all partners. Corporations can also provide more tax flexibility and can make business succession simpler, although paperwork requirements and ongoing expenditures for corporate compliance can be higher.
- Decide between a general partnership and a limited partnership. If you form a general partnership, all partners can be held legally liable for debts of the business and judgments against the business, creating significant risk of personal liability. A limited partnership protects some partners, but there must be at least one general partner with unlimited personal liability, making even limited partnerships more risky than most other entities.
- Ensure you meet the requirements for partnership formation. For example, to form a general partnership in California, you must have two or more people or entities engaged in a for-profit business, according to the California Secretary of State.
- Select a business name: You are permitted to use the partners’ surnames as your business name or you are allowed to create a fictitious business name as long as the name is not too similar to any other existing company that is currently registered with the state of California. If you have made the decision to use a fictitious name, after you have chosen the company’s name you will need to file a fictitious business name statement with the clerk of the county where the business will operate. You do not have to register the name of your partnership if you will be using the surnames of the partners.
- Negotiate, draft and sign a partnership agreement: This is an optional step not required by California law but is an important step so you and your partners can ensure you are on the same page in terms of what each partner will contribute, how profits and losses will be distributed, and how authority is shared among the partners for business operations. This step is too often overlooked, leading to costly disputes and even lawsuits.
- Complete the required forms. If you wish to form a limited partnership, you must submit a Certificate of Limited Partnership (Form LP-1) with the Office of the California Secretary of State. If you wish to register your general partnership with the state, you must submit a Statement of Partnership Authority to the Secretary of State. Registering a general partnership with the state is optional.
- Obtain an employer identification number: Your partnership will need an EIN if you intend to hire any staff members.
Getting Help from San Diego Business Attorneys
Gehres Law Library can guide you through all of the steps to form a business partnership. We can also advise you on other types of business entities you wish to create. Give us a call at 858-964-2314 or contact us online today to find out more. We offer a complimentary consultation to new clients.