My Partner Can Do What? Why You Need a Written Partnership Agreement

So . . . you’ve been talking to someone else about the possibility of going into business together. Great! Two heads are often better than one – you get twice as many ideas, money, and hands to do the work. But before you trot down to the county to file your DBA statement, kick in money or assets, or, really, do anything to get the business going – write up a partnership agreement.

Yes, sit down with your prospective partner, agree on some basic operating parameters, and write them down. Do this now, while everyone’s happy and enthusiastic and on the same page. You might not need a lawyer for this – just write down what you’ve agreed on, sign it, and put it in a safe place.

The reason is simple – you don’t need a written piece of paper to form a partnership, in law. Folks were shaking hands and making deals long before computers, typewriters, or even widespread literacy. In law, a partnership is simply an association of two or more people to carry on a business for profit.

There’s no requirement that each partner kick in money, let alone equal shares. But unless the partners agree otherwise, any profits are shared equally, not in proportion to partners’ contributions. And any losses are shared in the same proportion as the profits. Partners all have equal management rights. One partner can be personally liable for another partner’s actions on behalf of the business. Partners can freely sell or give their partnership interests to others. Adding a new partner requires the unanimous consent of the existing partners.

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What Do You Want to Be When You Grow Up?

So . . . you’re starting a business. You’ve decided on a name. ¬†Your next step – figuring out a structure.

Business structures come in several different different flavors. The right one for you depends on who you’re going into business with, what kind of business this will be, what size business you’re planning, what non-business assets you might want to protect, and the founders’ individual tax situations. In general, the more formal and complicated you get, the more protection you get in return – but you have to keep up with the formalities, and pay for the resulting protections.

We’ll look at each, going from simple to complicated.

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Who Do You Want to Be?

So….you’re starting a business. You’ve got a cool idea, a plan, and perhaps some money or some help. What you really need to get going, though, is – a name.

You’re on your own for the creative part – I’ve had a hard enough time naming pets. I do want to point out some things to consider when you’re deciding which name to use.

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