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Should I Form a Partnership With My Friend?

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!

© 2018 Law Office of Thomas B. Burton. All Rights Reserved.

Transcript and captions provided for ease of access for the hearing impaired.

For questions about this topic, or to suggest a topic for a future blog post, please contact my office.

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