Partnership/Operating Agreement Overview:
Thinking of starting a business with another person? Don’t start a business on a handshake. With a written partnership agreement or LLC Operating agreement for multi-member LLCs, you can write down all issues that may come up in a business and avoid misunderstandings with your business partner in the future.
A partnership is a business owned by two or more people. Each partner has a role in running the business. Each partner can borrow and spend money for the business. On the other hand, each partner is liable for the debts of the partnership. Partners share in the profits according to their proportionate share. This is usually determined from the initial investment each partner makes in the business, but partners can agree on a different method in the agreement. Multi-member LLCs are classified by the IRS as disregarded entity partnerships unless the LLC has filed to be treated as a corporation.
Partnerships or multi-member LLCs, as an entity, do not pay taxes. Each partner pays taxes on the income he receives from the business. Typically, a partnership ends when one partner leaves the business or dies. However, with a written partnership or operating agreement, partners can decide ahead of time that the business can continue to operate even if one of them leaves. You can also decide what happens to a partner’s share when he leaves; who can buy the shares, and how the departing partner’s shares will be valued.
Fill out our brief but specific questionaire and RushFiling will draw up your legally binding partnership agreement within 24 hours.
Partnership Agreement - How it works:
A partnership agreement or LLC operating agreement allows you to structure your relationship with your partners in a way that suits your business. You and your partners can establish the shares of profits (or losses) each partner will take, the responsibilities of each partner, what will happen to the business if a partner leaves, and other important guidelines. RushFiling, Inc. has eliminated the stress of a partnership agreement with 3 Easy Steps...
Start by filling out a precise online questionnaire developed for RushFiling, Inc. by our staff of legal advisors. Part of the RushFiling guarantee is that our professionals handle every order personally and that all your information remains private and confidential.
Our online questionnaire is free, safe & secure! You can save your work & return to it at any time. You may also call us toll free at 1-888-634-8316.
As soon as we receive your completed questionnaire, the experts at RushFiling, Inc. perform a thorough review of your information - including a check for accuracy and to make sure that nothing has been overlooked. We then fill out all the necessary paperwork and draft your requested documents.
Once the draft is approved, we’ll send you a completion package directly to your doorstep. You must then follow one last easy step to complete the agreement: Sign it.
Let the experts RushFiling take care of business! If you and your partners don't spell out your rights and responsibilities in a written partnership agreement, you'll be ill-equipped to settle conflicts when they arise, and minor misunderstandings may erupt into full-blown disputes. In addition, without a written agreement saying otherwise, your state's laws will control many aspects of your business. RushFiling — we do it right.
- Easy! Make only one online visit or call to our online document processing center — we do the rest.
- Affordable! Much less than attorney’s fees and competitive in the online market.
- Fast! We start processing your order within 24 hours or less!
- Personal! We take pride in the services we offer and guarantee your satisfaction.
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Partnership Agreement FAQs
A partnership is a business owned by two or more people that hasn't filed papers to become a corporation or a limited liability company (LLC). You don't have to complete any paperwork to create your partnership -- the arrangement begins as soon as you start a business with another person.
Although the law doesn't require it, many partners work out the details of how they will manage their business in a written partnership agreement. If you don't create a written agreement, the partnership laws of your state will govern your partnership.
Unlike corporations, partnerships are relatively informal business structures. Partnerships aren't required to hold meetings, prepare minutes, elect officers, or issue stock certificates. Generally, partners share equally in the management of the partnership and its profits and losses, and assume equal responsibility for its debts and liabilities. These and other details are typically described in a partnership agreement.
No law requires partners to create a written partnership agreement, but it's smart to do so. If you don't make a partnership agreement, you run the risk that the default rules in your state's partnership laws will govern your partnership in ways you and your partners won't like.
Creating a written partnership agreement will also give you and your partners a chance to discuss your expectations of each other, define how each of you will participate in the business, and help you work out any sticky issues before they become major problems.
Before you go into business together, you and your partners should decide what will happen to the partnership when one partner retires, dies, or wants to leave the partnership for some other reason, such as a divorce or bankruptcy. You might feel like you're being overly cautious or pessimistic, but it almost always makes sense to include "buy-sell" provisions in your partnership agreement to deal with these issues. It's the best way to prevent resentments and serious problems (including messy lawsuits) from cropping up later on.
The main difference between a partnership and an LLC is that partners are personally liable for any business debts of the partnership -- meaning that creditors of the partnership can go after the partners' personal assets -- while members (owners) of an LLC are not personally liable for the company's debts and liabilities.
Usually, when you hear the term "partnership," it refers to a general partnership -- that is, one where all partners participate to some extent in the day-to-day management of the business. Limited partnerships are very different from general partnerships, and are usually set up by companies that invest money in other businesses or real estate.
While limited partnerships have at least one general partner who controls the company's day-to-day operations and is personally liable for business debts, they also have passive partners called limited partners. Limited partners contribute capital to the business (investment money) but have minimal control over daily business decisions or operations.
In return for giving up management power, a limited partner's personal liability is capped at the amount of his or her investment. In other words, the limited partner's investment can go toward paying off any partnership debts, but the investor's personal assets cannot be touched -- this is called "limited liability." However, a limited partner who starts tinkering with the management of the business can quickly lose limited liability status.
Doing business as a limited partnership can be at least as costly and complicated as doing business as a corporation. For instance, complex securities laws often apply to the sale of limited partnership interests. Consult a lawyer with experience in setting up limited partnerships if you're interested in creating this type of business.