You must consider a range of factors when deciding on the right choice of entity for your business. Partnerships can provide certain advantages for a business owner compared to a typical corporation or entity.
Drafting a partnership agreement when forming a business can help owners avoid confusion about how the company operates and who will make key decisions. You should speak with a Dominion partnership agreement lawyer if you are in the process of forming a business. Call today to speak with a seasoned business attorney.
According to Texas Business Organizations Code Annotated § 152.051, a partnership is a legal entity where two or more people associate to carry on a business for profit. A partnership is created when at least two individuals:
Although state law does not require partners in a business to create a partnership agreement, the document can help set clear guidelines for the business’s management and eliminate potential disputes between the partners. For example, a partnership agreement can stipulate ownership percentages and profit sharing.
Consulting with a Dominion attorney can help ensure that your partnership agreement is enforceable and complies with applicable state laws. For example, Tex. Bus. Org. Code Ann. § 152.002, provides that a partnership agreement cannot:
When drafting a partnership agreement, consulting with a Dominion attorney can help you determine the essential terms based on the nature of your business or the partners’ relationship.
Some examples of key terms that a partnership agreement can address are:
Partnership agreements are beneficial when a business has several owners, as they can tailor the agreement to meet their specific needs.
A partnership agreement lawyer in Dominion could also help you understand the tax benefits of this structure. Unlike corporations, partnerships allow the owners to avoid double taxation. A corporation’s income is first taxed at the company level and a second time at the personal level upon distributions to shareholders.
However, partnerships can take advantage of “pass-through taxation.” A partnership’s income passes through the entity to its partners and is only taxed at the personal level.
Partnerships also have certain drawbacks. Unlike corporations or limited liability companies, the owners of a partnership can be personally liable for the business’s debts. This means a third party can sue a partner for their personal assets, like a house or car, to satisfy the partnership’s debts.
Certain types of partnerships, such as limited and limited liability partnerships, can limit a business owner’s personal liability while allowing them to take advantage of tax benefits. These entities can select a general partner to manage the business while allowing limited partners with a passive investment role.
When you have questions about drafting a partnership agreement, you should contact a Dominion partnership agreement lawyer at Begum Peláez-Prada PLLC as soon as possible.
Sasha Begum leads an experienced, knowledgeable team of legal professionals who could help support your legal business needs.
