Many small businesses are actually run as a partnership form rather than other types of business forms like corporations. Partnerships may be formed when more than one person comes together to do business with the aim of making profits. Partnerships can be formed either formally through a partnership agreement, or informally through an oral agreement or by the parties’ conduct.
Even for smaller business endeavors, partnerships can involve many different issues. These can include:
- Allocation of business assets and property amongst partners
- Division of duties and responsibilities of the partners
- Whether partners are general or limited, and what the roles are associated with each
- Specific issues such as company trade secrets and privileged information
One of the main distinguishing characteristics of a partnership is that it will terminate if any of the general partners becomes deceased or otherwise incapacitated. Therefore, the issue of continuity of the business goals and transferability of the operations often arises with partnerships. Legal issues in a small business partnership can be minimized through a well-written partnership agreement.
Unlike corporations, where the members often shielded from liability, partners can be held individually liable for the losses or debts associated with the partnership endeavor, unless the partnership is a limited partnership wherein the limited partners are also shielded from liability. This means that the partnership’s name does not always bear the financial burden when it comes to losses. Instead, creditors can reach the individual assets of each member if they need to.
This is important to consider, especially for small businesses that are just starting out and are still contemplating the type of business form to use. Partnerships can be easy to form, but they can also be quite transient and may offer limited protection for partners in terms of liability.
Partnerships can sometimes be an ideal business form for smaller business operations. You may wish to consult with a business lawyer if you need advice on forming a partnership. Your lawyer can help you when it comes to filing papers, drafting documents, and other tasks. Also, in the event of a legal conflict, your attorney can help you file a lawsuit and can represent you during the entire trial process.