Attorney Partnership Agreement Sample
An attorney partnership agreement sample is an important tool to have when forming your own partnership.3 min read
2. Advantages to an LLP
3. LLPs are Easy to Create and Administer
4. LLPs Have Better Tax Advantages
An attorney partnership agreement sample is an important tool to have when forming your own partnership. A partnership agreement enables individuals to resolve possible suits before they have had the time to develop. To stave off possible disaster, having an effective operating agreement that outlines the rights and responsibilities of all partners is vital. The good news is that partnerships are flexible in their structuring of the various rights and responsibilities of members.
Limited Liability Partnership Template Agreement
A formal partnership agreement will list numerous items that affect the running of the partnership. These things will include:
- The rights and obligation of partners
- Each partner's ownership stake
- The procedures to follow
A partnership agreement template will fit the needs of most small- to medium-sized partnerships. For larger firms, it is recommended for an attorney to draft a specialized agreement. It is important to note that agreements for limited liability partnerships (LLPs) can vary from state to state and by jurisdiction, so it is important to consult with legal counsel to see what regulations you need to follow.
Advantages to an LLP
Many business entities choose to form as LLPs because it helps to provide protection of their personal assets from creditors in the event the business goes under. They will also have some protection against risks, such as cases of negligence that may be levied against other partners. Even with limited liability, partners are responsible for business loans.
Items that partners can be protected from under an LLP include:
- Company bills that are delinquent.
- Debts taken on by the partnership if no personal guarantee was signed.
- Damages that occurred during the operation of the business.
- Debts that other partners have taken on.
The liability protection is similar to that enjoyed by many other entities such as:
- S corporations
- C corporations
One thing to note is that a partner that actively engages in the management of the partnership doesn't forfeit personal liability he enjoys.
Even though limited liability partnerships enjoy a degree of asset protection, the corporate veil can be pierced and partners held liable if any of the cases below occur:
- Fraud - If your business is found to be defrauding customs, vendors, or investors you could be held personally liable.
- Failure to meet the LLP requirements - If you do not perform the necessary requirements of operating an LLP, such as meeting minutes, annual reports, etc., you forfeit your rights to asset protection.
- Intermingling personal and business finances - Your business and its accounts should be completely separate. If you keep both business and personal funds together, you may open yourself up to liability.
- Using personal funds to pay bills - All partnership bills should be paid from a business account. If you pay any bills from your personal account, you could find yourself liable.
- Having insufficient capital for startup - If you do not have the proper capital to start your business, your company might be in trouble early and end up being personally responsible for the company's liability.
LLPs are Easy to Create and Administer
While LLPs can be easier and harder to create depending on the state they are forming in, they are significantly easier than starting and administering a corporation. Most LLPs can be created through the Secretary of State's website in the state you are forming. You can also obtain an EIN for free from the IRS for opening business banking accounts.
Steps you will need to take to form your LLP include:
- Decide where you wish to register your partnership.
- File your forms with the secretary of state's website.
- Get your free employee identification number (EIN).
LLPs Have Better Tax Advantages
Any type of partnership will function as a pass-through tax entity. This means that there will not need to be any taxes paid at the partnership level and all taxes will pass-through the business onto each partner's personal tax return.
Basically, taxes partners will be required to pay will break down as follows:
- Personal income tax - This can range between 10 and 30 percent depending on which tax bracket you fall in.
- Self-employment tax - Though you will not need to pay business taxes, you will be responsible for paying the 15.3-percent self-employment tax.
- Franchise of excise tax - This will depend on the nature of business and jurisdiction.
If you need help with an attorney partnership agreement sample, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.