New businesses are started daily across California. As readers of this legal blog may know, different businesses can take on different formations based on their needs and specific goals. One type of business formation plan that an entity can adopt is a partnership. Partnerships can offer benefits and drawbacks to different businesses and their owners, and this post will explore some important information about them as a part of a California businesses plan. Readers are encouraged to seek their own advice about business formation matters, however, as this post does not offer any legal advice.
Fact #1: Partnerships can offer a simple business structure
As mentioned, there are different structures that California businesses can adopt. Partnerships are relatively simple business structures that require at least two people to create. One thing that readers should understand about partnerships, though, is that the partners who share in the creation of a new business will also share in the debts and liabilities of the business.
Fact #2: There is more than one kind of partnership in California
The Secretary of State for California recognizes at least three different kinds of partnerships under state law. These include general partnerships, limited liability partnerships, and limited partnerships. Based on the kind of partnership a business adopts, its partners may have varying degrees of responsibility for the assets and liabilities of their entity. Additionally, some types of businesses must be organized under specific partnership formations, and individuals can learn more about these rules from their trusted business formation lawyers.
Fact #3: Business taxes may be the responsibility of partners
When setting up a new business, individuals should understand the tax liabilities that they may face based on the business formation plans they select. For example, general partnerships that generate profits will see their profits taxed as income made by the partners of the entity. Individuals should understand the interplay between income and taxes based on their business formation structures before they commit to specific business models.
Different businesses will require different levels of support and formation considerations before taking off. It is often helpful to business owners to seek legal counsel to ensure they are knowledgeable about the many business formation issues that may impact the success of their new entities.