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-Traut & Ruswick, APC can answer these questions for you.
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