Your small business is the perfect partnership; two or more owners agree to work in tandem with minimal state oversight and a pass-through tax status. You do not have to file many documents like corporations and limited liability companies do, although some partnerships in New York will have annual filing requirements. Although New York does not require a written partnership agreement, it is in your company’s best interest to adopt one.
When drafted by a skilled attorney, an agreement between the owners can help stave off future misunderstandings. If you are embarking on a business venture with others, speak with a New York partnership agreements lawyer at Sparks Law to memorialize the relationship’s important factors.
New York recognizes partnerships for tax purposes when at least two people decide to commence business activities and share profits and losses, including groups, joint ventures, and unincorporated organizations. Usually, the partners initially contribute an asset as payment for their share of the business.
Contributions can be capital, property such as real estate, unique expertise, or a copyright, patent, or trademark. Partnership agreements may be based on oral representations sealed with a handshake, but many problems can arise if the owners’ decisions are not memorialized in writing. People have a way of remembering information to benefit their positions, and any dispute can land partners in court.
The local attorneys at Sparks Law can help entrepreneurs take the following steps in forming a partnership:
Partnership agreements should consider a business’s goals and intentions, provide details about each partner’s initial contribution, and address whether they are expected to make future contributions. Allocation of profits and losses are usually based on the percentage ownership in the company, but they could be whatever the partners agree upon.
The agreement will specify how the owners will manage the company, voting parameters, how disputes will be resolved, how new partners might be admitted, and what actions are necessary if a partner dies or wishes to sell their owners’ share. The partnership agreement should also address how to wind up the company, including acquisition, bankruptcy, or merger.
Tax benefits also apply to a limited partnership, and elections can be specified in a partnership agreement. A New York attorney can advise business partners about their exposure to liability for business debts and tax consequences, as well as draft a partnership agreement to protect them now and in the future.
When owners do not memorialize their intentions or draft a generic agreement downloaded from the internet, New York law will prevail to handle disputes. For example, partners are equally liable if the company is sued, even if only one partner committed a bad act, and all partners risk losing personal assets if the company loses the lawsuit. As such, it is crucial for business partners in New York to work with a skilled attorney on a clear written agreement.
You will face challenges and experience triumphs if you enter business with other people. One way to ensure your success is to draft written agreements with your partners about the essence of the business—how it is run, who contributes what, and how you can grow and thrive.
At Sparks Law, a New York partnership agreements lawyer is standing by to help you facilitate your vision. Give us a call today to set up a consultation with a member of our team.