Corporations can be partners in partnerships. Many states, including Georgia, allow corporations to act similarly to individuals, which includes hiring employees, entering into contracts, and owning property. For this to happen, an officer of the corporation will sign a partnership agreement on the corporation’s behalf.
In a partnership, a corporation will have the same responsibilities and duties that a partner who is a person does. There are some advantages that a partner as a corporation can offer, for example, legal and financial protections that are not provided to people.
General partners who are people will typically have unlimited liability for the partnership’s debts, whereas a corporation has limited liability. A lawsuit can be filed against a general partner in order to collect partnership debts.
Corporations, on the other hand, are separate legal entities that shield the personal assets of the owners from lawsuits. Corporations that are partners are eligible to get a share of the profits of the partnership, and they are also responsible for the debts, judgments, and settlements the partnership incurs.
When a corporation is a partner, only its assets and not the assets of its employees, shareholders, or officers can be used to satisfy debts or liabilities of the partnership. In other words, for example, the house or car an officer of the corporation owns cannot be taken to pay for the partnership debts.
A general partnership is not an independent entity. Most states in the U.S. permit partners to be people, other partnerships, trusts, limited liability companies (LLCs), and corporations.
An S corporation may be a partner in a limited liability partnership and a general partnership. S corporations have what is referred to as pass-through income, which means that each of the shareholders will report their income and losses on their own tax returns.
Because of this, these corporations are not double taxed as C corporations are. For a business to be an S corporation, it has to meet requirements, including:
- Not including partnerships, corporations, or non-resident aliens as shareholders
- Not having more than 100 shareholders
- Only having specific types of shareholders, such as:
- Estates, certain trusts, and individuals
- Being a domestic corporation
- Only having one class of stock
- Not being an ineligible corporation under the Internal Revenue Code, such as insurance companies and other financial institutions
Being a limited liability partnership (LLP) does not shield the partners from the liabilities that are caused by their own negligence. When an S corporation is a partner in an LLP, however, it does have a shield for its shareholders against liability for negligence.
An LLP can also have multiple S corporations. An LLP must file a registration renewal every year or they can lose their limited liability protection. This can make the partners of the LLP vulnerable to claims on their own personal assets.
Individuals and corporations can be in limited partnerships and general partnerships. In a general partnership, all of the partners are involved in the daily operations of the business.
General partners are also equally responsible for the liabilities of the partnership. In a limited partnership, on the other hand, the partners are not typically actively involved in its daily operations.
A limited partnership is referred to as limited because each partner has limited liability. In a startup business, for example, corporations can be limited partners, which means they are not liable for the debts of the startup above what they initially invested.
Georgia lawyers can provide their clients with an understanding of the advantages and disadvantages of having a corporation as a partner in the state. If a partnership wants a corporation to join as a partner, a Georgia attorney can help through the process.
Legal Requirements for Forming a Partnership With a Corporation
There are certain legal requirements when forming a partnership with a corporation in Georgia. The corporation has to be in good standing, properly formed, and in compliance with all Georgia requirements. This includes filing an Articles of Incorporation with the Georgia Corporations Division.
The shareholders and board of directors of the corporation may be required to approve the partnership agreement. They may also have to approve the terms of the new partnership.
The partnership should draft a written partnership agreement, even if it is not legally required, that outlines the operations of the business, the responsibilities of each partner, and issues surrounding profits and losses.
The partnership name has to be registered with the Georgia Secretary of State. It must also appoint a registered agent, which is an entity or person located in Georgia that can receive official documents on the partnership’s behalf.
The partnership has to get an Employer Identification Number (EIN), which is required for tax purposes. An EIN can be obtained from the Internal Revenue Service (IRS). Additionally, the partnership has to file a registration with the Georgia Secretary of State each year.
The partnership must also get all of the required permits and business licenses and the federal, state, and local levels. It must register with the Georgia Department of Revenue. An organizational meeting also must be held to officially establish the structure of the partnership and formalize its operations.
To find out more about the requirements for partnerships in Georgia, it is important to schedule a Georgia lawyer consultation. An attorney can make sure the partnership is formed properly under Georgia law.
Advantages and Disadvantages of a Corporation Joining a Partnership
A corporation joining a partnership has both advantages and disadvantages.
Advantages
Some of the advantages of having corporations as business partners includes access to additional resources and capital to expand the business. It will also provide other perspectives, which can assist with problem-solving and decision-making.
It is also often cheaper to set up a partnership than setting up other types of business structures, especially when creating a new subsidiary or branch of a corporation.
Disadvantages
Disadvantages of having a corporation as a partner can include disagreements about numerous different issues, including strategies for the business, finances, and other issues. Because of the structure of a partnership, it can be hard to resolve disputes.
The corporation will also share in the partnership decision making. This often means that the process is slower and the corporation may have limited control.
If a corporation is a partner, it can be liable for the debts and obligations of the partnership. This places the corporation’s assets at unlimited risk.
Leaving a partnership can also be difficult for a corporation. It may lead to conflicts and disputes if a business relationship ends.
Special Considerations for Corporations Serving as Partners
Special considerations do exist for a corporation that is serving as a partner in Georgia. For example, there can be restrictions with being partners in limited liability partnerships (LLPs).
State laws can restrict membership in the LLP to those with professional licenses. When corporations want to be partners in LLPs, they usually have to have a majority of owners who have the required professional licenses.
Do I Need a Lawyer for Assistance With Partnership Laws?
If you have any questions, concerns, or disputes about Georgia partnership laws, it is essential to have a consultation with a Georgia corporate lawyer. Your lawyer can help you form a partnership that includes a corporation, draft a partnership agreement, and ensure your business meets all of the requirements under Georgia law.
LegalMatch’s free attorney matching services can help you locate a Georgia lawyer near you in as little as 15 minutes when you complete the online submission form. When you use LegalMatch, you are matched with licensed and prescreened Georgia attorneys who can help you with all of your partnership concerns and needs.
