Business partnerships in an organization can seem like a good thing, but you can’t go into one lightly. While partnerships can be formed without a written contract, it’s best to outline your organizational plan before you get too invested. Here are some other considerations when taking on a business partner.
Who Is Responsible for What?
A partner is legally responsible for company debts. Your business partner can also bind all the partners to a deal. A written contract will set up responsibilities between partners to limit each other’s responsibilities and liabilities. Keep in mind that you may still be liable for money owed by the business. Trust is one of the main elements of any partnership.
How Do Partners Pay Taxes?
Both partners are responsible for business taxes, but how those taxes are paid to the IRS depends on the structure of your business. Most of the time the partnership is a “pass-through entity” meaning that the partners report their share of losses or profits on their own personal income tax. Partners should be making quarterly payments to the IRS.
How To End a Partnership?
Everyone needs to have a back-up plan that considers what happens if dissolving the business, but you need to have a plan. What happens if one of you dies suddenly? Do you want the business to be in limbo while the estate goes through probate? What if one of you need to sell-out quickly? Having an agreement built into the written contract can save you a lot of headache and heartache.
Consider a Partnership Carefully
Talk to your legal advisor and or tax advisor about a business partnership before taking the next step. Contact Avery James for funding options that could eliminate your need for a business partner or help you and your partner take your business to new heights.