Creating a business partnership may seem like a fairly straightforward, friendly process. Two or more individuals agree to commit assets to the company in return for a percentage of ownership. Many small partnerships are entered into orally and never formally documented, which may lead to discord later. Business owners considering entering into a partnership should protect their interests and document all details of how the partnership will be run. Experienced legal counsel is essential to the formation of an effective business partnership agreement.
A partnership is a fairly simple business structure. However, any time you share assets and liabilities with another person, the agreement should be well thought out and legally binding. Your first consideration is the type of partnership you will be forming: general or limited.
General partnerships. General partnerships are the most common type of business with two or more owners. In a general partnership, partners all contribute assets to the business, receive profits, and also assume equal liability for debts. Regardless of which partner creates the debt all partners are responsible for repayment.
Limited partnerships. Limited partnerships differ from general partnerships in that partners do not all share the same liabilities. Most limited partnerships consist of at least one general partner and one or more limited partners. Limited partners share in profits, but are only responsible for losses up to the amount of their investment. These partners may be referred to as ‘silent.’
Limited liability partnerships. In Washington State there are two more recognized partnerships that must be registered with the WA Secretary of State, limited liability partnerships (LLP) and limited liability limited partnerships (LLLP). These further protect partners from liability.
Choosing which type of partnership is right for your business is an important decision. We have the experience to guide you to the best choice, and draft a partnership agreement that will protect your interests.
At Olympic Legal, we can help with most business legal challenges you might have on the horizon, from setting up your partnership on a sound legal foundation to drafting documents specifically tailored to your business needs, such as partnership agreement, office leases, etc. Call us at 360.630.3635 and put an experienced Skagit partnership lawyer to work.