When you start a business, you have to determine whether you are going to call the shots by yourself or have a co-owner. If you’re not too keen on the idea of running a business solo, you may consider starting a partnership. Find out how to form a partnership to get the ball rolling on your business venture.
So, what is a partnership, anyway? Well, the word “partner” in partnership is probably a dead giveaway. But, let’s briefly recap what a partnership entails.
A partnership is one of the many different types of business structures. It is a company that two or more individuals own and operate together. There are many types of partnerships you can establish, which we will discuss later.
Partnerships have pass-through taxation. Pass-through taxation is when the business taxes “pass through” the business onto another entity, like a business owner. Instead of the business paying the taxes, the partners do.
How to form a partnership: 10 steps to success
To form a partnership, you have to have patience, be willing to compromise, and do plenty of homework. Are you ready to get started? Learn how to form a business partnership by following the 10 steps below.
1. Choose your partners
When it comes to starting a partnership, you have to choose your partner(s) wisely. After all, you’re going to be working with them closely.
Take your time when choosing your partner or partners. While searching for a partner, look at things like:
Skills and strengths Knowledge Credibility
You’ll likely also want to pick a partner who is financially stable, shares the same vision as you, and can offer resources for the partnership (e.g., industry connections).
Don’t rush into a decision when selecting your partner. Ask yourself questions like, What do they bring to the table? Will we get along? Do we share the same values? The longer you ponder on these questions, the better.
2. Determine your type of partnership
As mentioned, there are multiple types of partnership to choose from. They include:
Limited partnership General partnership Limited liability partnership LLC partnership
Each type of partnership has its own pros and cons. Discuss the types of partnerships with your partner(s) to determine which one is the best fit.
3. Come up with a name for your partnership
After you determine your partnership type, flex your creative muscles by choosing a name for your partnership.
Your business name may incorporate the names of the partners (e.g., Miller & Brown). Or, it might not include the partners’ names (e.g., Lake City Jewelry)
Depending on your partnership type, you may need to include a combination of the partners’ names in your business name. For example, if you are an owner of a general partnership, the business name is generally a combination of the owners’ last names.
After coming up with a business name, check to make sure that it is not already taken by another business. You can search the name online, check domain names, and run a trademark search.
Some states also have requirements for partnership names. Do your research and contact your state before moving forward with a name for your partnership.
4. Register the partnership
After you come up with your partnership’s business name, it’s time to register with your state.
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