North Carolina partnerships are set up to pass profits and losses to partners to avoid double taxation. All partners are liable for the debts and obligations of general partnerships. However, those doing business together also have the option to become limited partners, limited liability partners, or limited liability limited partners. These designations restrict owners’ liability and provide other advantages.
Regardless of which option you choose, it is important to consult a skilled attorney at Sparks Law for help drafting and filing the necessary documents. If you are going into business with others, let a North Carolina partnership agreements lawyer create a contract that defines the duties of the partners and how the business will be operated.
North Carolina partnerships are made up of at least two people who go into business together with the intent of making a profit, which they share along with the company’s losses. All partners share management duties in general partnerships, and management is delegated in limited partnerships.
The partners make contributions to the business to capitalize it at formation. These contributions can be money; property (such as a building used for officers); services (such as advertising, accounting, and sales); or a patent, copyright, or trademark meaningful to the business.
North Carolina General Statute § 59-37 sets rules for the existence of partnerships. For instance, owning property together is not sufficient proof a partnership exists. Additionally, although receiving a share of the profits in a business generally establishes a partnership, this does not apply if the payment is for:
Other provisions apply. Entrepreneurs considering forming a partnership should consult a local attorney to make sure that they meet all elements of North Carolina law.
Although the Uniform Partnership Act does not require partnerships to file as many documents as corporations and limited liability companies (LLCs), it does require a repository for important information about the business. One of these documents should be a partnership agreement, which is like an LLC operating agreement or the bylaws of a corporation.
A partnership agreement is a contract between owners, in which they must live up to promises made. These contracts cut down on future misunderstandings. Because the contract is personalized according to the partners’ needs, an experienced North Carolina lawyer should draft the partnership agreement.
A partnership agreement explains how partners have agreed to operate the business, as well as how it will be dissolved if there is a time limit for operations or if the company faces bankruptcy or becomes a merger candidate. Without a detailed plan memorialized in a partnership agreement, the Uniform Partnership Act will be making company decisions.
A partnership agreement also includes who the partners are and what their initial and future contributions will be, and whether they are general or a form of limited partners. Other covenants include how partners will share profits and losses, how they will manage the business, how they will vote on issues, how disputes will be resolved, and the procedure for admitting new partners. The agreement should discuss what happens when partners die or want to sell their interests.
North Carolina has clear rules in place under the Uniform Partnership Act. Although the rules do not require co-owners to adopt partnership agreements, it is highly recommended that you draft one with help from a seasoned attorney at Sparks Law. These documents are invaluable in ensuring all partners know what is expected to avoid misunderstandings down the road.
A North Carolina partnership agreements lawyer can help you envision and memorialize your company’s plan. Call today to learn how our legal team can assist you.