One main reason to form a partnership is for its favorable tax treatment. Partnerships are generally viewed as an “association of co-owners,” and the profits “flow through” to the partners, and are taxed at the individual level, rather than taxed at the “entity level” of the business.
One of the first steps to forming a partnership is drafting the partnership agreement. This agreement addresses questions including the following:
- Where will the business obtain its capital investments?
- How will profits and losses be divided between or among the partners?
- May a partner borrow from the business?
- Will salaries be paid?
- What will the management responsibilities of the partners be?
- If a partner dies, will the business carry on? How?
- What is the “exit strategy” for a partner wishing to leave the business?
- How will disputes be handled?
Lewis Business & Estate Planning, APC can answer these questions for you.