Many Texas businesses will benefit by forming a partnership. This can bring in people who have different skills to add to and enhance the business, gear it up for success and share the risk. However, there are certain laws that are in place in the Lone Star State that detail the nature and creation of a partnership. Even savvy business people may get confused by all the legal requirements they must meet. For them, having professional assistance is a must. If the partners are neophytes and just starting out, it is vital to have guidance.
What is a partnership?
If two or more people combine to run a business for profit and own it, they have created a partnership. The intention of creating a partnership or not is irrelevant. They do not even need to refer to it as a partnership for it to be one.
There are certain rules in place to determine if there has been a partnership created. The factors that are considered in this context are if there is a right to get a share of the profits from the business; if they state that they are partners; if they take part in or have the right to control the business; agree to share losses or liability; and agree to contribute to the business financially.
What obligations must a partner adhere to in the business relationship?
A person cannot become a partner in a business unless all partners agree to it. In the partnership, each member will receive credit for what they have contributed to it. If, for example, one partner funds the business with more than other partners, that contribution is theirs along with its value. They will have a commensurate share of the profits derived from the business. In addition, they share in the losses, if any. Businesses need capital and often have slow periods when they will lose money. The partners will share in that.
Partners must abide by certain duties to be in the partnership. They have equal rights in managing and conducting business. The partners cannot use property that is owned by the partnership for individual gain. A business that sells furniture cannot have one partner exchange it for items that will benefit them individually. It all must be done for the good of the partnership.
There will be no payments for services that a partner conducts as part of the business other than that which is reasonable when winding up the business. When partners make payments for the good of the partnership and face liability because of it, they have the right to be repaid.
Partnerships can be difficult and having professional help can be crucial to success
Having a product or service that people think will be a solid business can be exciting. Starting the business is not easy and there are many legal considerations to think about. With a partnership, it is a positive to have others to rely on. They will invest their time, energy, money and experience into making the business work.
Still, there are underlying factors that should be known for everyone to be protected. When considering a partnership or some other business entity, it is important to have experienced and caring professional advice that understands all areas of business law.