You have found some trusted business partners and plan to operate a company for profit together. If you have chosen to start a partnership, you will benefit from minimal filing requirements and a pass-through tax structure.
Legally, you do not need to draft a document that outlines how you will make joint business decisions. However, creating this type of contract with help from a South Carolina partnership agreements lawyer is a good idea to secure your company’s vision. If decisions you make with your partners are not in writing, you could face trouble in the future. A skilled attorney at Sparks Law could help you avoid this.
When at least two people go into business together with the intent of making a profit, they may form a partnership. Partners initially contribute something of value to get the company going. Contributions can be money, real property such as land with an office building, other property such as office equipment or delivery trucks, or intellectual property.
The types of partnerships offered in South Carolina are compared below, with information highlighting the differences in liability and tax considerations.
General partnerships (GP) allow partners to share profit and taxes on revenue according to their share ownership. This information is reported on personal tax returns. The partners also are personally liable for the company’s debts.
Limited partnerships (LP) are a good choice if the company is attempting to raise capital because limited partners invest but generally are silent about management decisions. Additionally, they are liable for the company’s debts only up to the amount they invested, although general partners are still liable for all the company’s debts.
Limited liability partnerships (LLP) allow limited partners to avoid liability for the actions of other people. For example, if one partner incurs debt in the partnership’s name and absconds with the money, the other partners will not be liable in any lawsuit as long as they were not involved in the fraud. LLPs must register with South Carolina and renew annually, which a skilled partnership agreements attorney could help with.
Although South Carolina does not require a written partnership agreement, a well-drafted one can save owners from future misunderstandings. The agreement is a contract among the partners, where each agrees to the terms, duties, responsibilities, and benefits outline in the document. Some information that should be included in a partnership agreement includes:
Some partners may discuss their business matters and believe an oral agreement will suffice. However, this can cause legal problems when disputes arise. For instance, Section 33-41-930 of the South Carolina Code of Laws Unannotated provides several reasons for dissolving a partnership, providing they do not violate the partnership agreement. If there is no agreement, a partnership under state law can be dissolved if a partner dies, files bankruptcy, feels like dissolving the business, or is expelled from the partnership.
A written agreement could address South Carolina law and create a protocol for dissolution that is not forced by the above circumstances. A local partnership agreements lawyer at Sparks Law could draft an airtight document to suit a company’s business needs.
Entrepreneurship and the formation of a partnership are exciting parts of your business journey. However, to avoid problems down the road, all partners should negotiate their positions and plans for the business with help from a legal advisor.
At Sparks Law, a South Carolina partnership agreements lawyer is here to listen to your business goals and memorialize your vision in a contract. Call for your initial consultation.