Los Angeles Partnership Agreements Lawyer

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.