How To Add A New Business Partner

There could be many reasons why you would want to add a partner. She might be bringing in more capital, specific expertise that you and your other partner’s don’t have or it might be a natural progression after working in your organization at a senior position for a while.

The legalities of entering into a partnership are the following:

Partnership Agreement

Partnership agreements are the terms agreed upon by the new partner and their share of the company. It also discusses their responsibilities and liabilities as partners of the company. General partnerships: This is the most basic partnership agreement, wherein all partners share the company’s profits and management functions. Income attained by each partner depends on his stake in the company.

Limited partnership: Consists of partners who are responsible for management and debts of the company, whereas the other partners only provide capital.

Limited licensed partnership (LLP): This is comprised of licensed professionals such as lawyers, accountants and architects who remain protected from the liabilities caused by their partners. However, they are liable for their own actions.

There are details to be taken into account before creating a partnership agreement. These details are ownership interest, division of authority, voting power, addition of new partners, exit strategy, and purchase price of contracts. Legal counsel is advised during the negotiation of these clauses. Disputes between partners regarding clauses not mentioned in the agreement come under the purview of the state defaults.

State registration

Each state has its own separate laws regarding partnerships. If you are entering a new business partnership, determine which state to register in. This might be advantageous to some partnerships.

Tax ID registration

A company that acquires a new partner needs to register for a new tax ID number as it is considered a new partnership for tax purposes.

Company name registration

In some cases, acquiring a new partner may require the company name to be amended. New company names can be registered online, by mail, or in person.

A new partner must be added with careful consideration, as he co-owns the company. Legal clauses in the partnership agreement must be iron tight, regarding exit strategy and buyout prices. With large corporations come the large amount of paper work required to be filled in. Lawyers aid in filling out the required paper work and making sure no legal loopholes go unnoticed. New partners as well as partnering companies must always rely on legal counsel before entering into a partnership.