Ohio General Partnership: Everything You Need to Know
Ohio general partnership refers to two or more individuals who agree to co-own a business entity for the aim of making a profit.3 min read
Ohio general partnership refers to two or more individuals who agree to co-own a business entity for the aim of making a profit. A general partnership is the simplest form of business partnership and the least regulated. While a general partnership enables the partners to share control and income of the business, it does not protect them from liabilities.
How Is a Partnership Formed?
According to the Ohio Revised Code section 1776.22, a partnership, regardless of the reasons, is formed automatically when two or more persons come together to form a business for profit.
Definition of a General Partnership
A general partnership is a business created when two or more persons engage in a profitable activity.
Does a General Partnership Need to Be Registered?
A general partnership does not need to register with Ohio secretary of state to carry out its business operations there.
Disadvantages of a General Partnership
One of the disadvantages of a general partnership is that it's not protected from liability like an LLC.
The partners are allowed to do anything they like in the name of the partnership, but they are also personally responsible for any liabilities. The implication of this is that each partner is liable for the business debts and obligations initiated by other partners, even if they do not know about the transaction.
How Does Partnership Safeguard Itself Against Some of the Pitfalls?
A business partnership can take certain steps to protect itself against some of the inherent hazards. One such measure is the partnership agreement.
What Is a Partnership Agreement?
A partnership agreement is a legally binding written document that serves as a code of conduct and details the ownership stakes and duties of the partners.
What Is the Importance of a Partnership Agreement?
The partnership agreement is important for some of these reasons:
- The partnership agreement can determine the authority of the partners over the affairs of the business.
- The partnership agreement details the procedure for admitting new partners, expelling existing partners, selling ownership stakes in the business, and the process of dissolving the partnership.
- Under Ohio laws, the partnership agreement is binding on the partners.
- The partnership agreement recommends a complete dissolution and cessation of the partnership in the event of unresolvable differences among the partners.
Should You Hire an Attorney to Write the Partnership Agreement?
It's essential to get an attorney to write the partnership agreement, especially an attorney conversant with Ohio laws and their implications on your partnership agreement. Attorneys are in the best position to guide your partnership against pitfalls, as they are the first point of call when partnerships run into trouble. While you can find several free templates of partnership agreements on the internet, it's not advisable to use them.
If you hire an attorney to help you write your partnership agreement, you can rest assured that the agreement will offer effective solutions to potential problems the business might encounter and also protect your interests. An attorney can also help you create the ideal partnership that suits your needs.
Ohio Partnership: Tax Considerations and Personal Liability
For tax considerations, Ohio partnerships have the status of pass-through entities, which implies that the earnings of the partnership go into the partners' personal income, where it is taxed.
Some Ohio partnerships need to file biennial reports, and the necessary forms can be downloaded on the online portal of the Ohio secretary of state. You can also find relevant information about federal tax regulations regarding partnerships on the IRS website.
Is Personal Liability an Important Topic to Consider?
When creating a business, personal liability is only second to taxation in order of importance. Liabilities are your responsibilities as a partner in the business. The personal assets of a partner who has full liability for the partnership's debts and obligations are considered assets of the business and vice versa. Your personal assets can be used to settle the debts of the business, making it extremely important to consider how far you are willing to go for your company.
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