Use one or more of the credit agencies (Experian, Equifax, or TransUnion) to run a credit check. Is there something you wouldn't want clients or customers to see? The moment two or more parties begin doing business, the partnership begins. Clinton M. Sandvick worked as a civil litigator in California for over 7 years. This article has been viewed 21,878 times. The Balance Small Business uses cookies to provide you with a great user experience. You don’t have to file paperwork with the state to set one up, your business income will pass through to your personal tax return, and you won’t have ongoing recordkeeping or reporting requirements. % of people told us that this article helped them. Make sure to … What you need to do. Doctor of Law, University of Wisconsin-Madison. How to Start a Business Partnership. Good for you. Legal Information Institute. When you have all the information you need for your partnership, go to your state's Secretary of State website and look for the business or corporations section. Because an LLP is a professional business practice, you may not use a fictitious name and the name must include the words "Limited Liability Partnership" or may be abbreviated "LLP." We know ads can be annoying, but they’re what allow us to make all of wikiHow available for free. For this reason, it is often very difficult for sole proprietors to raise capital. the partnership must apply for an ABN and use it for all business dealings. When you set up a business partnership you need to: choose a name. Even if you have known someone from kindergarten, it's a good idea to make sure they are good partner material. What types of partners do you want in your partnership? Page 4. The other forms of partnership are legally going to give your partner a say in management, which you probably won't want. . The incoming partner must invest in the partnership, bringing capital (usually money) into the business and creating a capital account. In addition, C corporations are double taxed--subject to corporate income taxes and capital gains taxes on the dividends paid to shareholders. Initial hirin… You must be able to trust the decision making, temperament, vision, and competence of your partner and vice versa. LLPs are sometimes subject to reporting requirements, and are generally more costly to start than the other types of partnerships. Don’t write the first word of your business plan until you know that you and your partner have the same dreams, goals and vision for your new business. A general partnership may consist of two or more individuals whom may have the right to run the business, while they would also be responsible for the debts and financial obligations of the business. Digital Media Law Project. She has written for The Balance on U.S. business law and taxes since 2008. In return, each partner shares the business profits and losses. Look into getting a good insurance policy. The only legal requirement is that the partnership is registered with HMRC and each partner registers for self-assessment and completes a separate tax return. When you have all the information you need for your partnership, go to your state's Secretary of State website and look for the business or corporations section. For a general partnership (see Limited Liability Partnership for another type) this will shape many aspects of the business. There are 16 references cited in this article, which can be found at the bottom of the page. This article has been viewed 21,878 times. A comprehensive list of businesses that must register with the federal government can be found at: While a sole proprietorship is probably the leanest and most efficient business structure in terms of turning conception into action, there are drawbacks. Sometimes liability concerns can be assuaged with an insurance policy, it just depends on what the business does. Part of the process of setting up your business as a partnership is registering the partnership correctly. They are more attractive to lenders, but subject to more regulation than the other business structures. We use cookies to make wikiHow great. What Kind of Partnership Do You Want to Start? If cost sharing is your primary motivation for entering into a partnership, consider a limited liability partnership (LLP) if that form is legally available to you. If you are thinking of starting a partnership, below is a checklist of steps to take before you open for business. You will need to decide how much each initial partner must contribute, and how much new partners in the future will contribute. Usually, this means professional firms, like lawyers, doctors, or architects. Marriages and friendships end, and if your partnership is going to end along with it, you need to have ironed out the terms of dissolution and division of assets in advance. This article was co-authored by Clinton M. Sandvick, JD, PhD. 1 - Start by creating a shared Vision & Mission The easiest way to start a business with someone else is to establish a general partnership. Partnerships can come in two forms: the general partnership and limited partnership; but there are many other subcategories of partnerships (e.g., limited liability limited partnership). In a nutshell, for a business enterprise to be referred to as a partnership business, it must posses the following major characteristics: ♦ The business must be owned by more than one person. He received his JD from the University of Wisconsin-Madison in 1998 and his PhD in American History from the University of Oregon in 2013. These two types of partners are called equity partners and salaried partners. 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