Partnership is a form of business in which two or more sound persons come together to form a new business with the same interest in mind. In Partnership, all partners act towards the single strategic direction and all partners are equally liable. In partnership all partners share profit and losses in the ratio agreed upon. Partners are responsible for the other partner’s business actions, as well as their own. Each partner is bound by the acts and representations made by their co-partners in dealing and transacting with third persons. Registering a partnership is fairly simple; each partner must agree to do business with the others. Moreover, a partner may contribute not only money or capital contribution. He may likewise put in his business or industry in the partnership.
Why should Anyone create Partnership?
Persons with small investment often choose a sole proprietor business structure when starting up. Greater rewards may result from forming a partnership. Partnership registration offer more freedom for business owners with shared business tasks and the potential to earn greater profits. There are many advantages to sharing a business with partners, including:
- Partnership formation can be easy and inexpensive to set up.
- If you create partnership, there will be more capital because you combine your resources with the other partner
- One partner can sustain the business during another’s illness or absence due to other commitments.
- That will cut down the burden of working different tasks.
- Fairly easy to dissolve and recover your share of investment.
- All Partners work and own the profit as per the settled terms and conditions.
Forming a Partnership
If you have decided to form a partnership then you must go through an extensive process to make your partnership legally authorized. In this act of deed you need to start with;
- Discussing the details of your business with your partner(s) face to face. This includes the objective and goals of the business, the products and services that will be offered, where the business will be operated, what role each business partner will have in the growth of the business.
- Decide which type of partnership is more suitable for your business.
- Once you decide the form of partnership the next step is to get an Employer Identification Number (EIN) for you and your partners to use in the course of business. That will be necessary for you to open your business bank accounts, register with your state and pay employees.
- Now, its time to draw up a partnership agreement.
- File your business license in your state and be sure to register your business as a partnership, listing all owners.