How to Form a Partnership

A partnership allows you to share the risks and rewards of a business venture with one or more partners.

Instructions

Difficulty: Moderate

Things You’ll Need:

• EIN
• Accountants
• Banks
• Business Loans
• Legal Services

1. Obtain all required local, state and federal licenses and permits. Contact the Small Business Administration (SBA) in your area to find out which ones you will need.
2. Register the name of the company in the county where the partnership does business, and obtain a Fictitious Business Name Certificate.
3. Get an Employer Identification Number from the IRS using Form SS-4.
4. In addition, get an ID number from the state Department of Revenue or the appropriate state office in your area. (Check with the SBA to find that office.)
5. Draft a written agreement between the partners determining a financial plan, management responsibilities, and the rights and obligations of individual partners. A written agreement is not required but can save a lot of headaches should a dispute arise. It's advisable to engage the services of an attorney in drafting this document.
6. Get help preparing tax returns, filing estimated taxes and preparing business statements until you understand them fully.

Tips & Warnings

• Partners report profits and losses on their individual income tax returns and must pay self-employment tax.
• General partners assume unlimited legal liability with no protection for personal assets if the business goes bankrupt.
• Responsibility for the business actions of each individual partner is shared by all partners.