Attorney Thomas B. Burton discusses some of the pitfalls of forming a general partnership with a friend and suggests you look at other business structures before deciding whether a general partnership is best for you and your small business.
Transcript of Video: Should I Form a Partnership with My Friend?
Today's question should I form a
partnership with my friend or colleague
to go into business? My answer: it depends.
but in general I would say no be wary of
a partnership when a better form for
many people exists today and that's
called an LLC general partnerships were
an old form of business but they
contained unlimited liability for each
partner that means that one partner was
completely liable for the acts of his
other partner if you know this person
very well and you can trust them perhaps
you want to go into a general
partnership however it would be better
to not share that unlimited liability
for the acts errors and omissions
of your partner in many situations
that's where an LLC can be a better
business structure you can set it up so
that you're both 50/50 owners but set up
an operating agreement that talks about
how disputes will be handled
perhaps tie-breaking votes things
like that and you can still retain the
limited liability protections of an LLC
without that unlimited general liability
of a general partnership in your
operating agreement you can also spell
out what each member is allowed to do
without the approval of the other member
there are some situations where a
partnership still makes sense
a lot of times this is in professional
entities such as law firms or a dental
practice or medical practice but talk
carefully with your lawyer about whether
you could possibly structure it as an
LLC or other type of entity before
entering into a partnership
Great question and thank you for asking!
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Transcript and captions provided for ease of access for the hearing impaired.
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