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Los Angeles Partnership Agreements Lawyer

Partnership Agreements Lawyer In Los Angeles

As a new business owner, one of your initial decisions will be choosing the right business formation structure. If you and at least one other person are co-owners with the goal of making a profit, a partnership could be the ideal choice for you. While California doesn’t require formal paperwork to start a business, it is advisable for you and your co-owners to have a written partnership agreement that outlines how the business will be managed.

Having a contract between the business owners is crucial as it helps in resolving inevitable disagreements that arise when multiple owners hold different opinions. At EJP Law, P.C., our skilled Los Angeles partnership agreements lawyer has extensive experience in drafting these documents for new business owners. Let our firm ensure the success of your company and help prevent costly disputes in the future. Contact us now for an initial consultation and to learn more about how we can help you and your business.

Negotiating, Drafting, and Reviewing Partnership Agreements in Los Angeles

We routinely work with clients in facilitating clients with the negotiation, drafting, and review of partnership agreements in Los Angeles. It is imperative for you and your partners to possess a comprehensive partnership agreement that is both legally enforceable and dependable. In addition to other pertinent matters, your partnership agreement should address the following key points:

  • The financial contribution of each partner
  • The ownership stake and distribution rights of each partner
  • Decision-making authority, including tie-breaker procedures
  • Procedures for adding new partners or allowing a partner to leave the business, and
  • Procedures for dispute resolution and partnership dissolution

Every partnership is distinctive. A California partnership agreement should be completely tailored to fulfill the exclusive requirements and objectives of your business. Ensure that you possess an agreement that is perfectly suited to you and your company. The most exceptional contracts anticipate and address potential issues before they even emerge.

California General vs. Limited Partnerships In California

Partnerships are not subject to state and federal taxes. Instead, profits and losses are distributed to owners who report them on their personal tax returns. This pass-through tax status prevents double taxation and applies to both general (GP) and limited partnerships (LP). For a deeper understanding of the advantages and disadvantages of this status, consulting with our Los Angeles partnership agreements lawyer is highly recommended.

General Partnerships

Owners of a general partnership bear the responsibility for the company’s debts and are personally liable for any lawsuits, even if only one partner incurred the debt or acted in bad faith. Under California law, general partners oversee the business and have the authority to bind the firm.

A partnership agreement plays a crucial role as it establishes guidelines for such matters. For example, the agreement may stipulate that no partner can obligate the business for an amount exceeding $5,000 without the unanimous consent of all partners. Our experienced partnership agreements attorney in Los Angeles understands these potential challenges and can address them effectively through a comprehensive partnership agreement.

Limited Partnerships

Limited partnerships consist of general partners who handle the day-to-day operations and limited partners who provide initial capital without involvement in management. Limited partners bear responsibility for business debts and legal settlements only up to the amount they invested. Since limited partners lack decision-making power, safeguarding their investments is best achieved through a well-defined partnership agreement that outlines expectations from the general partners.

Registering a Partnership in California

Registering your partnership in California is necessary under various circumstances. Regardless of the type of partnership you have, it is important to register with both federal and state tax authorities. By registering federally, you will obtain a federal employer identification number (EIN) from the United States Internal Revenue Service, which will allow you to open a bank account and comply with the state’s tax regulations. Additionally, California partnerships are required to establish accounts with the following authorities:

  • Board of Equalization: This must be done to engage in sales and other business taxes.
  • Employment Development Department: This is required for businesses that hire employees to ensure they are properly taxed for their wages and earnings.
  • Franchise Tax Board: This registration is required for income, franchise, and other state taxes imposed on partnerships.

Businesses must obtain state and local licenses to comply with legal requirements. Collaborating with our knowledgeable Los Angeles partnership agreements lawyer can help you properly register and license your business. Ensuring that your business has the necessary licenses is crucial to avoid potential legal repercussions in the future.

California General Partnerships vs. Operating an LLC in California

When a business partnership operates in California without a written agreement, each partner has the authority to independently bind the partnership to any obligations or deals they desire, without the need for consent from other partners. It is important to note that all partners are equally personally liable for these decisions and any resulting debts or obligations.

Although the California Revised Uniform Partnership Act allows a general partnership to file a Statement of Partnership Authority with the Secretary of State, this provides limited protection, primarily in relation to real estate matters.

One of the main reasons individuals choose to establish a limited liability company (LLC) as a business entity is to mitigate general liability. However, it’s important to understand that an LLC stands for a Limited Liability Company, which means that while the company itself is responsible for its debts and obligations, the members can still be held accountable if the company is not adequately funded and organized or if it engages in fraudulent activities towards its creditors.

In California, an LLC can operate with one or more members and can have one or more managers. A single member can act as the manager or a separate non-member can assume that role. The operating agreement of a California LLC can determine the voting powers and profit distribution according to the preferences of the members.

The key advantage of an LLC is that, in general, only the capital contributed by the members is at risk, safeguarding their personal assets from liability. However, members can still be held personally liable if their conduct is tortious or harmful to others, if they breach their fiduciary duties to the LLC, or if they personally guarantee any business deals or loans on behalf of the LLC.

Both general partnerships and LLCs prevent owners from being subjected to double taxation on their profits. While an LLC is required to file its Articles of Organization, a general partnership does not need to file its agreement or any organizational documents with the Secretary of State. However, a partnership will still need to obtain a fictitious business license unless it conducts business under the names of the partners.

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Frequently Asked Questions

What is Covered in Partnership Agreements?

All owners must unanimously embrace a partnership agreement, a binding document that outlines the terms they collectively agree upon. This agreement encompasses various aspects, including how they will provide support to the growing business. It is crucial for the partnership agreement to be precise and comprehensive, addressing key points such as:

  • Each partner’s capital contribution, whether in cash or other assets that buy the partner a share of the business
  • How profits and losses are shared
  • General partners’ management duties
  • The protocol when one partner wants to exit or passes away
  • Voting rights concerning acquisitions, mergers, assumption of debt, and the need for a consensus in fiscal matters

Partnership agreements in California are customized to suit the specific needs of a business, whether it’s a general or limited partnership. By engaging an experienced partnership agreements attorney in Los Angeles to draft a comprehensive partnership agreement, partners are provided with an opportunity to openly discuss their concerns and seek clarification. The final document should accurately reflect the desires and intentions of all owners involved.

Is A Business Partner Agreement Necessary?

Although not mandated by the state of California, business partnership agreements should not be overlooked. Establishing an official partnership is a significant decision, with potential long-term implications for your financial well-being and success in the business realm. It is prudent to craft a well-designed partnership agreement that safeguards your best interests.

What Do Business Partner Operating Agreements Do?

Formal business partnership agreements delineate the terms and conditions governing the partnership. These encompass the duration of the partnership, financial contributions from each partner, ownership shares, and more. Additionally, they provide guidance on making business decisions and resolving disputes among partners.

Contact Our Los Angeles Partnership Agreements Lawyer Now

In a new partnership, it is crucial for all owners to understand their roles and expectations. Without written documentation, misunderstandings can arise due to memory lapses and unanimous decisions may be challenged. To ensure the success of your company, it is important to have a clear roadmap for the future. At EJP Law, P.C., we frequently work with California businesses with their partnership agreements. Our experienced Los Angeles partnership agreements lawyer can help create a comprehensive contract that reflects the owners’ intentions and safeguards your business. Don’t hesitate to contact us today to learn more about how we can assist you.