Colorado Business Ventures: Going Into Business With A Partner

A partnership is a common business entity in Colorado. There is an age-old saying that two heads are better than one. However, for a partnership to be successful, there must be a good balance between the partners, and the partnership must be structured correctly.

At the Law Offices of Clifton Black, PC, our Colorado Springs partnership attorneys help entrepreneurs choose the best business structure for their startups and business ventures. Our legal team can help you establish your partnership so that it has the best chance for success. We can also help you dissolve a partnership when partners are ready to go their separate ways.

What Is A Partnership?

A partnership is a business entity that consists of two or more owners. Generally, every partner contributes to the business in several ways. Contributions can include funding for the business, including dedicating assets or property for the partnership’s use. Contributions can also include labor, work or specialty expertise.

There are three general types of partnerships:

• General partnerships: In many general partnerships, owners work together to operate the business and they split the profits equally. If the partners do not contribute equally, provide an equal amount of work or services or split the profits equally, these arrangements should be acknowledged in a partnership agreement.

• Limited partnerships: Limited partnerships are generally used for short-term projects. In a limited partnership, partners may elect to have limited liability and limited involvement.

• Joint ventures: Joint ventures are similar to general partnerships, except the intent is generally for a single project or short time period.

Our business formation attorneys provide customized legal guidance and advice. If you are considering a partnership for your business venture, they will take the time to listen to your goals, help you identify legal strategies and customize a solution that best fits your partnership’s needs. Our legal team will help you create the foundation for your partnership that will allow you to move forward with your business venture with confidence.

How Do You Form A Partnership?

In Colorado, forming a partnership is simple and inexpensive. A legal partnership can be created online at the Colorado Secretary of State website. You can also search the site’s database to see if your desired name is available. It’s generally a good idea to make sure that you choose a unique name for your partnership. A name that is similar to another business could cause confusion. The Colorado Secretary of State provides a fill-in-the-blank form called the Certificate of Limited Partnership, Statement of Registration (Limited Liability Partnership) certificate.

What Is A Partnership Agreement?

In a partnership agreement because partnerships entail more than one person in the decision-making process, it’s important to discuss a wide variety of issues up front and develop a legal partnership agreement.

Generally, partnership agreements should include documentation about:

• How future business decisions will be made,
• How the partners will divide profits
• How the partners will resolve disputes
• Provisions for changes in ownership, like bringing in new partners or buying out current partners
• How to dissolve the partnership

Although partnership agreements are not legally required, they are strongly recommended. Operating a partnership without a formal agreement can be risky. Our business formation lawyers can help you choose the appropriate business entity for your business venture and help you make sure that you have all of the necessary documentation and agreements in place to give it the best possible chance for success.

Paying Taxes As A Partnership

Most businesses will need to register with the IRS, register with state and local revenue agencies, and obtain a tax ID number or permit.

Partnership taxes generally include the following:

• Annual return of income
• Employment taxes
• Excise taxes

Partners in the partnership are responsible for several additional taxes, including:

• Income tax
• Self-employment tax
• Estimated tax

A partnership must file an “annual information return” to report the income, deductions, gains and losses from the business’s operations. However, the business itself does not pay income tax. Instead, the business “passes through” any profits or losses to its partners. Partners include their respective share of the partnership’s income or loss on their personal tax returns.

Dissolving A Partnership

There are several steps to dissolving a partnership. It is crucial to follow both legal and financial processes to ensure a smooth transition. These include:

• A formal agreement to dissolve the partnership: First, you must formally agree to dissolve the partnership. This usually involves a written agreement signed by all partners.
• Notifying authorities: You will also need to notify relevant authorities, such as the Colorado Secretary of State and the IRS.
• Settle all debts: Debt settlement is a key part of the process. You must pay off any outstanding debts before distributing the remaining assets. This ensures that creditors are satisfied and legal issues are avoided.
• Distribution of assets: Next, you’ll need to distribute the partnership’s assets. This can include cash, property and other valuable items. The distribution should follow the terms outlined in your partnership agreement.

It is not uncommon for disputes to arise during a partnership’s dissolution. Usually, the partnership agreement sets forth procedures for navigating disputes. However, even with a clear agreement, disagreements can arise. Having a plan for resolving disputes can save time and reduce stress.

Our experienced business lawyers can guide you through each step of dissolving a partnership. Having legal guidance during this process can facilitate a smooth transition during what can be a difficult time. Using an attorney from the start can make the process more efficient and prevent unnecessary delays.

Consult A Colorado Springs Partnership Attorney

Our experienced partnership attorneys empower businesses by providing strategic legal solutions tailored to your needs. They are available for initial consultation appointments. To schedule a consultation, contact our office by sending us a message through our website. You can also reach us by calling our office at 719-328-1616.