Some partnerships in business can work out extremely well, especially when the partners involved each brings special skills to the table so that all the necessary skills are covered. One thing is very important when establishing a partnership is that all the details be committed formally to a legal document, because there may come a time when all the partners don’t see eye to eye. This is the safest way for any partnership to proceed, so that all members involved have a clear understanding of each other’s roles and responsibilities, and also what they can expect to take out of the partnership.

General or Limited Partnership

General partnerships are arranged when at least two people agree to start up a business in order to obtain profits. The key feature of this type of partnership is the joint liability of all partners involved. That means that each member is liable for the partnership’s debts, and no one has any greater or lesser responsibility for such debts. 

Limited partnerships will consist of at least one limited partner and one general partner. The limited partner gets this designation because that individual only has limited personal liability. In most cases, this liability extends no further than the limited partner’s investment in the business. The limited partner is generally a silent partner who contributes cash, but has no responsibility for conducting the business, and has no say in how it should be operated.

Steps for Setting Up Your Partnership

The first thing you need to do in starting up your business partnership is to prepare a business plan. This will provide a roadmap for you which covers perhaps the first three to five years of your operation. Next, you’ll need to choose a name for your company, preferably one which describes what the business is all about. 

Then you’ll need to make sure all partners understand the tax liabilities of the company, so there are no surprises at the end of the year. Next, you need to commit the details of your partnership agreement in writing to a formal document. This will avoid any disputes later on because any verbal understandings you might have had can easily be misinterpreted. 

Need Funding to Setup Your Business? 

Establishing a partnership often takes some working capital in order to get it off the ground. If you need funding to start up your new partnership, contact us at LMC Alternative Business Capital, so we can discuss some options with you.