How to Create a Partnership
A business partnership is created when two or more people come together to establish a business. The main benefit of establishing a partnership as opposed to a sole proprietorship is that you are sharing the financial responsibility with another person. Naturally, you also have multiple people who can bring money to the table for the initial business investment. Establishing a partnership is fairly simple; each partner must agree to do business with the others.
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Instructions
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Discuss the finer details of your business with your partner or partners-to-be face to face. This includes the objective and goals of the business, the products and services that will be offered, where the business will be operated, what role each business partner will have in the growth of the business, how often you and your partner will meet regarding the business, how problems will be resolved, who will control the business in case of a withdrawal or passing on of one of the partners and how decisions will be made about spending money on the business. Keep minutes (notations) of what was agreed upon at the meeting and have each partner sign these notes.
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Decide if you want to become a general or limited liability partnership. The only difference is that a limited liability partnership contains partners (called LPs) who are on the hook only to a certain extent depending on their investment and the agreement. They do not have any power over management decisions.
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Get an Employer Identification Number (EIN) for you and your partners to use in the course of business. You will need this to open bank accounts, register with your state and pay employees.
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Draw up a partnership agreement. Be sure to include the full name and address of each partner, a description of the business and business name, the profit split (will it be a 50/50 arrangement, 60/40 or another division?), the contributions that each partner will make to the business (for example, will one partner be silent and provide only cash to the business?) and the powers that each partner has in the arrangement. Also include specific details that you and your partners agreed upon at your initial meeting. Have a lawyer look over the agreement and have each member sign before a notary. This will be the binding agreement that creates the actual partnership.
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File for a business license in your state (see Resources for a listing by state) and be sure to register your business as a partnership, listing all owners.
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Tips & Warnings
You may want to include a clause in your partnership agreement about whether you will accept new partners in the future.
Don't assume that just because your partner is a good friend everything will go smoothly. In fact, it is usually close friends who tend to become enemies when a partnership's business dealings go sour. Even if you and your partner are best friends, draw up a written, official partnership agreement.
