North Carolina Law on Corporations as Partners

Yes, in North Carolina, a corporation can be a partner in a partnership. There are many states, including North Carolina, in which a corporation acts similarly to a person, including entering into a contract, hiring employees, and owning property. For a corporation to join a partnership, an officer of that corporation typically signs a partnership agreement on behalf of the corporation.

In partnerships, corporations have the same duties and responsibilities as individual partners. Corporations as partners can provide many advantages, such as financial and legal protections that are not given to individuals.

A general partner that is a person will usually have unlimited liability for the debts of the partnership, where a corporation will have limited liability. Lawsuits can be filed against general partners to collect the debts of the partnership.

A corporation, in contrast, is a separate legal entity that shields the owner’s personal assets from legal claims. A corporation as a partner can get a share of the profits of a partnership. It will also be responsible for the settlements and judgments against the partnership and the debts the partnership incurs.

Only assets of a corporation, and not assets of a corporation’s shareholders or employees, can be used to satisfy liabilities or debts of a partnership where the corporation is a partner. This means that property that an officer of the corporation owns cannot be used to pay for debts of the partnership.

In many states, partners in a partnership can include corporations, LLCs, trusts, other partnerships, and people. S corporations can be partners in limited liability partnerships (LLPs) and general partnerships as well.

An S corporation uses pass-through income. With this structure, each shareholder reports income and loss on their own individual tax return.

This means that a corporation does not face double taxation in the same way that a C corporation does. In order to be an S corporation, a business has to meet several requirements, such as:

• 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
• 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

A limited liability partnership (LLP) does not provide a shield for the partners for any liabilities that are caused by their own negligence. LLPs can also include more than one S corporation.

The LLP has to file a registration renewal each year, or it will lose its limited liability protection. This may cause the partners of an LLP to be vulnerable to a claim on their personal assets.

Corporations and people can also be in general and limited partnerships. With general partnerships, the partners are all involved in the daily operations of the partnership.

In addition, all of the general partners are held responsible for the partnership’s liabilities. In contrast, with limited partnerships, not all of the partners usually participate in daily operations. If a startup business, for example, forms as a limited partnership with a corporation as a partner, it will not be held liable for the debts of the startup beyond the amount that it initially invested.

A North Carolina lawyer can give their client advice about the advantages and disadvantages of having a corporation as a partner in their partnership. An attorney can also provide advice to the corporation about joining a partnership and assist with the process.

Legal Requirements for Forming a Partnership With a Corporation

When forming a partnership with a corporation, there are some legal requirements to follow in North Carolina. The corporation has to be properly formed, in good standing, and comply with all North Carolina requirements for corporations, including filing the proper documents with the North Carolina Secretary of State.

It is important to have a written partnership agreement, even though it may not be a legal requirement. The document needs to outline the structure of the partnership, the roles and responsibilities of its members, profit and loss sharing, and terms for dissolution if needed in the future.

The partnership name must be registered. The partnership also has to get an Employer Identification Number (EIN), which is required for businesses that operate as partnerships or corporations, have employees, or file tax returns.

The partnership also has to choose and appoint a registered agent. This is a person or entity who receives legal documents on behalf of the partnership.

If necessary, the partnership must then file any required documents with the North Carolina Secretary of State. For more information on forming partnerships in North Carolina, it is important to have a North Carolina lawyer consultation to ensure the partnership is formed properly.

Advantages and Disadvantages of a Corporation Joining a Partnership

It is important to be aware that there are certain advantages as well as disadvantages of corporations joining partnerships.

Advantages

Examples of the advantages of corporations as business partners can include having access to more resources and capital that can be used to expand the partnership. It will also provide outside perspectives that can help with decision-making and problem-solving.

It can also be cheaper to create a partnership than other forms of businesses. This is especially true for creating new corporation subsidiaries or branches.

Disadvantages

There are also disadvantages to consider related to having a corporation as a partner. This may include disagreeing on many different issues related to the business, such as finances, strategies, and many other matters.

Due to the structure of a partnership, it can be harder to resolve disputes. The corporation also shares in the decision-making processes of the partnership, but its control may be limited.

Corporations that are partners may be liable for the debts of the partnership, placing the corporation’s assets at an unlimited risk. Because of the structure of a partnership, it can be challenging for a corporation to leave when the business relationship has ended.

Special Considerations for Corporations Serving as Partners

There are certain special considerations for corporations that become partners in North Carolina. There may be, for example, restrictions on being partners in limited liability partnerships (LLPs).

The laws in a state may place restrictions on membership in an LLP to individuals who hold professional licenses. If a corporation seeks to become a partner in an LLP, it must typically have a majority of owners who hold the required professional licenses.

Do I Need a Lawyer for Assistance With Partnership Laws?

If you need any type of advice about partnership laws in North Carolina or have a dispute involving a corporation as a partner, it is essential to consult with a North Carolina corporate lawyer. Your corporate attorney can assist with forming a partnership that includes a corporation, draft the written partnership agreement, and make sure the partnership meets all of the requirements under North Carolina law.

LegalMatch provides free lawyer matching services that will help you locate a North Carolina attorney in your area in as little as 15 minutes online. By using LegalMatch, you will be matched with prescreened and licensed North Carolina lawyers who can assist with any partnership need or dispute you may have.