Forming a business partnership requires careful evaluation of all of the partners involved in the venture. As you examine the potential partners, there are several key questions you should ask to evaluate each relationship. These questions will not only assist in forming the most successful business partnerships, but they will serve as a reference point when evaluating any other business transaction you may need to join. When seeking partners for your business ventures, take time to ask these questions: How do I know this person and what is their level of expertise in my field? What are their plans for the future and how can we help them build their business?
What is the best way to finance this type of business? Can either of us pay the expenses involved in establishing the partnership? Can we split the cost between the two of us and will one partner to provide the other with financial support while the other fulfills his/her responsibilities and obligations to others? Will my partner make me a guarantee for some type of compensation if the partnership doesn’t work out?
Are there any significant risks that can arise due to the nature of the business partnership? Is one partner less financially capable than the other or has a poor credit history? Your personal financial situation will determine the extent to which the partners in your business will share profits. These auctions, via sites such as Boat Parts are also available online.
Is there a legal way to incorporate my business entity? Weintman says, “I would start with a standard general partnership, then move to incorporating a limited liability company (LLC) or a corporation (corporation). Be sure to check and double check the requirements of the state where your business entity will be incorporated.”
Can we incorporate as a C-corporation? According to Weintman, “In the C-corporation form [the most common for S-corporations] the partners’ earnings and losses are usually tax-determined and pass through UBIT [untaxed gross receipts], meaning that they’re taxed like income. If you’re using the pass-through option for your C-corporation, make sure you’ve registered it as a partnership even if your business is a sole proprietor – or sole owner with limited liability – so your partners’ UBIT is taxable income.”
There are a lot of great reasons why we should take the time and effort to Form a Business Partnership. But we have to remember that we’re talking about partnerships here. Forming a partnership does not remove the liability of your partners. The partnership agreement must be clearly established to cover all of the specific financial transactions and responsibilities of the partners in order for the partnership to be valid.