Can a Company Be a Partner: Everything You Need to Know
A business partnership occurs when two or more people enter into an agreement, either written or verbal, regarding their contributions to a company. 3 min read
Can a company be a partner? In short, yes.
A business partnership occurs when two or more people enter into an agreement, either written or verbal, regarding their contributions to a company. Are you involved in a business with someone in which you are considered co-owners and you share in the profits? If so, you are in a partnership.
Typically, contributions made by partners are either financial or expertise, sometimes both. In turn, the parties involved are responsible for the management and operations of the business and share in the profits. Additionally, this type of business relationship is easier to enter into than that of a corporation.
While it is not necessarily required to have legal documents in place or filed with your state’s Secretary of State, it is best practice to do so to ensure the partnership is fair and equitable to all involved. By having written and agreed upon documentation and outlining the parameters of the partnership, it can go a long way in resolving any issues that may arise as time goes on.
Becoming a Partner as a Corporation
Corporations can enter into a business relationship as partner because corporations can operate in many of the same ways that an individual can. Specifically, the two things required to enter into a partnership are the ability to own property and the ability to sign contracts, both of which can be done by corporations.
As corporations often have more legal and financial protections for those who manage them, there are some advantages to entering into a partnership with a corporation. Additionally, as corporations are typically much larger than other business structures, they can have many shareholders, which can greatly increase the resources of the company with whom they are entering into the partnership. Another advantage to forming a business partnership with a corporation is that should the CEO (or equal position) of the corporation pass away, resign, get fired, or otherwise no longer be serving in that capacity, the partnership is not affected as the board of directors can take over in that role.
Entering into a new business relationship often times cannot be made unilaterally. Rather, it is a decision that will have to be voted on by the shareholders. The obvious exception to this, of course, being as it pertains to sole proprietorships.
How to Form a Partnership
Both individuals and corporations can enter into either general partnerships or limited partnerships. So, what is the difference between the two, so you can decide which one may the best for you, your business or your corporation? Some of the key differences include:
- In a general partnership, there is equitable division of management responsibilities.
- Profits are divided equally among the partners in a general partnership.
- All partners are responsible for the running of the day-to-day operations of the business in a general partnership.
- In a general partnership, the partners are responsible for the hiring and firing of employees, signing contracts and other documents, taking out any necessary loans, and the like.
- Within a general partnership, all of the partners are responsible for any debts that are incurred, as well any legal issues that may arise.
- In a limited partnership, there is at least one partner who wishes to have a more passive role regarding the day-to-day management of the business.
- The liability is limited for the partner who is considered to be the limited partner (or, sometimes called a silent partner) in the case of a limited partnership.
- Generally speaking in the case of a limited partnership, the limited partner is usually contributing financially, but not necessarily contributing other resources like skills or resources.
- There are no formalities that exist as it pertains to entering into a general partnership, as such you do not have to any written contracts or agreements. (However, it is best practices to always have written agreements that have been signed by all involved parties.)
- Limited partnerships to have some formalities attached to them.
While a corporation certainly can be a partner, there are various things to consider as you decided which type of partnership is going to be best.
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