You believe in your idea for a new business, and you have enlisted partners to embark on this entrepreneurial journey with you. Choosing to operate as a partnership will keep the paperwork minimal and allow you to pass profits through to partners, keeping tax filings simple.
You also do not need to adopt bylaws as corporations do or an operating agreement common to limited liability companies. Although you could seal your deal with a handshake among partners, it is best to work with an experienced attorney on a written contract. A Connecticut partnership agreements lawyer should draft a document binding the partners to its terms and memorializing how the company will run.
Connecticut allows partnership agreements to be written or oral. Although it might be tempting to assume partners are on the same page and forgo a written agreement, doing so could lead to costly misunderstandings.
Without a written contract, or with a contract that is vague, the Connecticut Uniform Partnership Act will fill in the blanks to dictate how the partnership is operated. For instance, in UPA Sec. 34-314(C)(3), it is assumed a person is a partner if they share the profits, except for certain tricky exceptions that should be addressed in a detailed contract.
A written agreement creates the protocol for forming, operating, and dissolving the business, keeping partners in control rather than deferring to state law. Examples of information to include in a partnership agreement are the following:
A skilled lawyer at our Connecticut office could draft a comprehensive partnership agreement tailored to the business’s vision.
Partnerships are comprised of two or more people who agree to operate a business together to generate profits. Partners can contribute cash, property that can include real estate, assets such as a fleet of vans or restaurant equipment, or intellectual property. The value of the capital contribution usually determines the partners’ share of ownership in the business.
Connecticut permits three types of partnerships. A local attorney could further discuss which type may be best suited for a particular partnership.
Every partner in a general partnership (GP) is personally liable for the business’s debts. If the company is sued and loses or is not paying its bills, partners’ assets can be seized to cover them. The pass-through tax structure circumvents double taxation because the profits and losses are attributed to the partners who claim them on personal income tax returns.
A limited partnership (LP) includes at least one limited and one general partner. This structure works well for partnerships raising capital because limited partners are only responsible for what they invested if the business cannot pay its debts.
General partners are liable for the company’s debts, but they also are the ones that run the business; limited partners do not have a say. LPs are also pass-through entities for tax purposes. A local attorney could help determine if a limited partnership is suitable for the company’s needs and goals.
Limited liability partnerships (LLP) offer partners protection from liability for the acts of fellow partners. Thus, partners are only responsible for their own actions. An LLP is also a pass-through tax entity.
Founding a business is in the great American tradition of entrepreneurship. It is even more exciting to share the adventure with like-minded co-owners if you are forming a partnership. You can prepare for the future by tackling crucial details in a written contract before issues arise.
At Sparks Law, a Connecticut partnership agreements lawyer can help you establish all the details of your business, from how it is formed to how it is dissolved. Call today so we can get you started.