How to Set Up a Partnership in California

If you decide to enter into a general business partnership with another person in the State of California then you should make the decision formal by filing the proper state paperwork. This isn't an obligation in California; a partnership forms automatically in California when two or more people agree to operate a business together even if the agreement is only verbal. However, having the partnership details laid out on paper will clarify what your rights and responsibilities are in the partnership.

Instructions

Name Your Business

1. Select a name for your business partnership. Take the time to choose a good name that will work well as a web domain name, too.

2. Make sure that the name is legally available in your county. Perform a search through your local county's registrar of fictitious business names. For example, Los Angeles residents can visit the "fictitious business names" web page of the Los Angeles County Registrar-Recorder/County Clerk.

3. Check if the name is also available at the state level. Do a search via the California Secretary of State's recorded corporation and limited liability names. If the name is being used by another business that's in a completely different industry than you, then it's still available for you to use.

Create Your Partnership

1. Draft a partnership agreement with your business partner. This outlines what you and your partner consider to be your rights and responsibilities in this partnership. You may use a template or you may work with an attorney to draft this agreement.

2. Sign the partnership agreement. It is best to do this in the presence of a third party such as your attorney, or in front of a notary public.

3. File a Statement of General Partnership with the California Secretary of State. (See Resources.)

4. Register your partnership at the local level. Do this by getting a "fictitious business name," also called a DBA. This requires filing a form with the county and publishing an announcement in a local paper. See Resources for more information.

5. Register your business name as a trademark. This can be done at the state level if you are only going to be working within California or you can do it at the federal level.

Bank Accounts, EINs and Permits

1. Obtain an Employer Identification Number (EIN) from the Internal Revenue Service. This can be done online and takes just a few minutes. You'll receive your EIN immediately. See Resources for the form.

2. Open a business bank account for your partnership.

3. Obtain a local city business license. Some cities in California require this depending on the type of business that you have. Check with your local city government.

4. Apply for a California Seller's Permit. If your business will be selling goods that are taxable then you need this permit as well. See Resources for the form.

5. Register with the California Employment Development Department. This is only necessary if you and your business partner will be hiring employees.

Tips & Warnings

• Although these steps aren't required to form a legal partnership in California they can be very helpful in the event that legal situations arise with your business in the future.

• You may wish to hire an attorney to advise you on forming a partnership and to file the paperwork for you.

References

• Step By Step Guide on How to Form a General Partnership

Resources

• Los Angeles County Fictitious Business Names
• Statement of General Partnership with the California Secretary of State
• How to Get a DBA (Fictitious Business Name) in California
• Application for EIN
• California Seller's Permit Application