Top 5 Things to Consider When Seeking a General Partnership in Chicago
For any Chicago business, the necessity for sound legal counsel is paramount3 min read
For any Chicago business, the necessity for sound legal counsel is paramount. While starting any business may seem daunting, understanding the key elements of a general partnership is critical before entering into such a commitment. This includes understanding legal requirements with respect to the formation of the general partnership, as well as potential dispute resolution options that may arise. It is therefore essential that all parties are aware of the five considerations when entering into such an agreement before taking any action.
Chicago business owners who are contemplating a general partnership should ensure they have considered the following topics:
1. Developing a Comprehensive Agreement
The initial step for any general partnership in the Chicago area is to develop a comprehensive agreement. The agreement should consist of parameters, expectations, and areas of responsibility for all members of the partnership. Chicago business owners should have extensive and detailed discussions with their partners or potential partners to ensure full disclosure and mutual understanding of the nature of the agreement. Furthermore, legal counsel should be consulted for the purpose of formalizing the agreement in an officially binding document (e.g. articles of agreement) that covers all parties equally and accurately while protecting their respective interests.
2. Establishing Clear Lines of Authority
The lines of authority within a general partnership are established by the parties involved in the agreement. It is integral to create a clear picture of the decision-making processes, especially within a partnership comprising of multiple individuals. Therefore, the agreement should contain information such as the collective rights of the partners and responsibilities each partner has to the other. This should include issues such as the allocation of funds, the sharing of duties, and responsibility for any legal commitments.
3. Understanding Legal Requirements
It is essential when entering into a general partnership in the Chicago area, to be aware of the legal requirements for such an agreement, and the implications these regulations will have on the partnership. Companies are required to register with the state upon formation and file important paperwork such as partnership agreements and applications for a business license. Businesses will also need to consider the tax implications of forming a partnership (which includes the filing of an annual income tax return). Failing to comply with the relevant regulations and paperwork may result in hefty fines and taxes.
4. Selecting the Right Legal Support
Engaging the right legal support for the new business is paramount to ensure all parties are adequately protected under the partnership agreement. Businesses should opt for an experienced law firm who can provide them with the legal advice they need to operate within the boundaries of the law. Such firms will also be able to help manage and resolve any potential or existing disputes between parties. It is also important to note that since different states have different legislation regarding the formation of partnerships, businesses should ensure they select legal support that is familiar with the specific restrictions of their operating state.
5. Developing a Dispute Resolution Plan
Every business should have an effective dispute resolution plan in place to address any issues that may arise throughout the course of the partnership. Dispute prevention strategies include establishing accountability measures for all parties in the agreement, developing internal dispute resolution procedures and setting out clear lines of authority. Additionally, businesses should make plans for how to handle a partner leaving the agreement, or how to manage such a situation without involving court proceedings.
Forming a general partnership requires careful planning, and a thorough understanding of the rules and regulations that such agreements come with. With the right approach, businesses can ensure a successful agreement and a mutually beneficial relationship between all parties involved. Chicago businesses should therefore consider the key elements of forming a partnership: developing a comprehensive agreement, establishing clear lines of authority, understanding legal requirements, selecting the right legal support, and developing a dispute resolution plan. UpCounsel offers a network of experienced attorneys with extensive experience in the formation and maintenance of general partnerships.