Partnerships

Here are the steps you should take to form a partnership in the state of New York. A partnership (also known as a general partnership) is created whenever two or more people agree to do business together for profit, even if there is no intent or written agreement to form a partnership. While there are no formal filing or registration requirements needed to create a partnership, partnerships must comply with registration, filing, and tax requirements applicable to any business. There are also some steps every partnership should take to make sure they follow sound business practices when they start their new venture.

To form a partnership in New York, you should take the following steps:

Choose a business name.

File a fictitious business name.

Draft and sign a partnership agreement.

Obtain licenses, permits, and zoning clearance.

Obtain an Employer Identification Number.
To find out how to establish a partnership in any other state, see Nolo's 50-State Guide to Forming a Partnership. To read more about partnerships in general (including the difference between a partnership and limited partnership), see Nolo's section on Partnerships.

Choose a Partnership Name:
In New York, a partnership may use the surnames of the individual partners or may use a fictitious business name. If you plan to use a fictitious business name, it must be distinguishable from the name of any other company currently on record. It is also a good idea to choose a name that is not too similar to another registered business because of common law and federal trademark law protections. To make sure your business name is available, run a search in the following government databases:

New York Department of State

U.S. Patent & Trademark Office: (Click on the TESS link under Tools.)

File a Fictitious Business Name:
If you use a business name that is different from the surnames of the individual partners, New York requires you to file a certificate of fictitious business name with the county clerk's office in the county where your business is located. The appropriate form for filing a fictitious business name in New York is available from the county clerk's office. The filing fee varies by county.

Draft and Sign a Partnership Agreement:
A partnership agreement is not a mandatory legal requirement for establishing a partnership. However, it is a very important step to ensure there are no misunderstandings between you and your partners. A well-drafted partnership agreement will help you decide in advance how to handle certain situations.

Here's a list of some of the items that should be covered in your partnership agreement:

Each partner's contribution to the partnership

The allocation of profits, losses, and draws

The partners' authority and management duties

Voting rules for decision-making

How to admit new partners

What happens upon the bankruptcy, withdrawal, or death of a partner.

How to resolve disputes.

Even well intentioned, honest partners can find themselves in a legal battle if they do not have a written partnership agreement memorializing their initial purposes. Your partnership agreement can always be amended at a later date should circumstances or conditions change. For help creating your partnership agreement.

Obtain Licenses, Permits, and Zoning Clearance:
Your business may need to obtain business or professional licenses depending on the type of business activity you are engaged in. New York provides a comprehensive website of every occupation that requires a license by a partnership. You can obtain this information from the New York Permit Assistance and Licensing. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.

Obtain an Employer Identification Number:
Partnerships are required by the IRS to obtain an Employer Identification Number, or EIN. This is a nine-digit number issued by the IRS for tax reporting purposes. Partnerships must have an EIN regardless of whether or not they have employees. Registering for an EIN can be done online at the IRS website.

In New York, businesses are required to report taxes and file various employee reports. You may need to use your EIN when registering your business to report taxes through the New York Department of Taxation and Revenue. If you have employees, you must report and pay employment taxes on a periodic basis. You will be able to report and pay all employment related taxes by registering with the New York Department of Taxation and Revenue.

Next Steps

It is important to consider doing the following once you have created your partnership:

Open a business bank account. Using your assumed business name and EIN, you should set up a bank account to keep your business and personal finances separate.

Obtain general liability insurance. Because partners of a partnership are personally liable for all debts and obligations of the business, a business liability insurance policy may be your only financial protection against unforeseen events. Having adequate business liability insurance can protect your business and personal assets in the event of a lawsuit or other claim against your business.

Report and pay taxes. Depending on your specific business activities, you may be required to report and pay taxes, such as sales tax and use tax. You can obtain more information by registering with the New York Department of Taxation and Revenue.

General Question

What are the requirements for formation of a Partnership?

To determine whether a partnership exists courts look at: (1) intention of the parties, (2) sharing of profits and losses (3) joint administration and control of business operation, (4) capital investment by each partner, and (5) common ownership of property.

How much does the process cost?

For pricing and further assistance, please email us at immigration@syedpro.com or contact us via whatsapp through website or you can simply view our contact us page for further information on HOW TO CONTACT US. And an Immigration Assistant from our office will get back to you as soon as possible.

What are the three different types of Partnerships that can be formed in the United States?

There are three relatively common partnership types: general partnership (GP), limited partnership (LP) and limited liability partnership (LLP). A fourth, the limited liability limited partnership (LLLP), is not recognized in all states.

How many owners are required to form a partnership?

A business with two or more owners can be a partnership. Much like a sole proprietorship, forming a general partnership does not require filing any documents or taking any specific action. If you and another person simply run a business together, it is a general partnership by default.

Are there rules on how partnerships are run?

The only requirement is that in the absence of a written agreement, partners don't draw a salary and share profits and losses equally. Partners have a duty of loyalty to the other partners and must not enrich themselves at the expense of the partnership. Partners also have a duty to provide financial accounting to the other partners.

For example, if you're in a partnership, you cannot make a deal to buy from a supplier at an inflated price with the understanding that you will receive a kickback from the supplier. It's a violation of your duty to the partnership, and your partners can demand an accounting from you regarding the deal. If you're found to have violated your duties, the partners can sue you for damages and strip you of your profits from the deal.

On the other hand, if you simply make a bad deal by signing a contract to pay a supplier an inflated price, the partnership will be forced to accept the deal. One of the potential drawbacks of a partnership is that the other partners are bound to contracts signed by each other on behalf of the partnership. Choosing partners you can trust, and who are savvy, is critical.

The only other rules would be found in a written partnership agreement. Such an agreement could outline procedures for making major business decisions, how profits and losses will be split, and how much control each partner maintains.

How are taxes paid by partnerships?

Taxes are paid through the personal income tax filings of individual partners. As a partner, you have income through your share of the profits (or a loss if the partnership is losing money), and you report this income on your personal taxes. The partnership itself reports profits and losses to the IRS on a special form (so that the IRS knows how much you receive), and you pay the taxes on your portion.

How do partnerships terminate?

In the absence of a written agreement, partnerships end when one partner gives notice of his express will to leave the partnership. If you don't want your partnership to end so easily, you can have a written agreement that outlines the process through which the partnership will dissolve. For example, the partnership can dissolve if a certain event happens or it can provide a mechanism whereby the partnership can continue if the remaining partners agree to do so.

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