Getting Started LA Partnership Definition
Starting a Business Partnership: An Exciting Legal Endeavor3 min read
Starting a business involving a partnership is an exciting endeavor that requires an understanding of the legal distinction that applies to that form of business. In the United States, a general partnership business typically is an unincorporated business with two or more partners. As such, partners will need to understand the definition of a general partnership and how to set up such a business. In this article, we review the various aspects of a general partnership, including how general partnerships are classified, what are the tax implications, and the legal obligations that come with a general partnership. We also specifically review legal advice related to setting up a general partnership in the state of California, particularly in the City of Los Angeles.
When it comes to business partnerships, the most commonly known business type in the United States is the general partnership. In order to create a legal partnership, partners must have an intention to combine their resources into a single business entity for the purpose of revenue generation, as well as to be personally or jointly liable for the debts of the business. In California, the basic definition of a general partnership is set out in the California State Partnership Act, which states that a partnership is an association of two or more persons to carry on a business for profit. It is important to note that the term “persons” may refer to natural or legal persons.
The various aspects of a general partnership, such as the tax implications, legal obligations, and how partnership property is handled can be confusing and complex. To gain a better understanding of the legal implications that come along with starting a general partnership, one should consult with a qualified business attorney in the state of California, and more specifically knowledgeable counsel in the city of Los Angeles.
When setting up a general partnership in California, there are several factors to consider such as registering the partnership, drafting a partnership agreement, and setting up an appropriate legal entity. The first step to forming a general partnership is to file a Statement of Partnership Authority (Filing Form GP-1) with the California Secretary of State. This form is used to create a legal entity and provide notice of the business name, location, and a description of its business operations. Once the form has been filed, the general partnership must then register with the California Franchise Tax Board in order to pay taxes and keep a Fictitious Business Name Statement on file.
The next step to forming a general partnership is to create an enforceable partnership agreement between the partners. The partnership agreement should outline the rights and responsibilities of each partner, how the business will be run, how disputes will be resolved, how decisions will be made, how investments and profits will be distributed, and what happens if one partner dies, becomes incapacitated, or leaves the partnership. Additionally, the agreement should also include how to make amendments to the agreement as well as how it can be terminated. It is essential for all partners to read and review the agreement carefully in order to ensure that all interests are protected and all potential disagreements are established in writing before establishing the business.
The last legal step in forming a general partnership business in California is to choose the appropriate legal entity and to register it with the California Franchise Tax Board. The most common entity type in California is a Limited Liability Partnership (LLP), which is a separate entity from the partners. This form of entity helps protect the partners’ personal assets should the business face any legal or financial liabilities.
In the City of Los Angeles, it is important to consider local regulations when forming a general partnership. It is important to consult with local counsel who understands the complexities of business formation in Los Angeles to ensure that the general partnership is properly set up and all associated obligations are met.
General partnerships are one of the most common business entities in the United States and, if structured properly, can be a beneficial form of business. Understanding the various aspects of a general partnership, including the tax implications and legal obligations, along with obtaining local legal support in the City of Los Angeles, can help both partners ensure a successful business partnership.