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A partnership is an association of two or more individuals or entities through which any business, financial operation, or venture is carried on. The partnership is an entity separate from its partners. There are generally three types of partnership: General Partnerships, Limited Partnerships, and Limited Liability Partnerships. The differences among these are significant. Partnerships are governed by state law pursuant to the Uniform Partnership Act.
The partnership is formed by filing a Certificate of Partnership with the Secretary of State. It is recommended that the partners agree in writing to the terms of the partnership in the event of a dispute. A partnership agreement is a document that formalizes the relations among the partners.
A Well-Drafted Partnership Agreement Will
- state the purpose of the partnership;
- determine how the profits and losses are allocated;
- state if and when additional capital contributions must be made;
- set forth the rights, powers, and duties of each partner; and
- require partners to maintain the confidentiality of all of its customers and other business records. Also, partnership agreement language will govern whether the partnership possesses the requisite characteristics to be taxed as a partnership.
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