PARTNERSHIP

PARTNERSHIP

1. What is a partnership? A partnership is a unique and voluntary relationship between two or more persons who have reciprocal right and duties.

   • For limited partnerships, the two most common forms of legislation are the Uniform Limited Partnership (ULPA) and the Revised Uniform Limited Partnership Act (RULPA). To establish a limited partnership, the partners must enter into a written agreement. State limited partnership laws apply to situations that the limited partnership agreement does not address.
     • CAPITALIZATION How is a partnership capitalized?
       • Typically, on the formation of a general or limited partnership, each of the partners contributes money or other property to the partnership in exchange for his or her general or limited partnership interest.
       • When the tangible assets used in a general partnership need to be formally transferred to the partnership?
         • When the partners contribute assets other than cash to the partnership, a formal transfer is generally required.
           • PARTNERSHIP INTERESTS Do all the partners have equal interests in the partnership?
             • There are two forms of interests in a partnership. The first is an interest in a share of the distributions of profits and losses from the partnership business.
             • What does a partner own?
               • A partner owns a percentage of the partnership. The partnership owns the partnership assets.
             • How do partners share in the profits of a partnership?
               • Typically, the general partners of a general or limited partnership decide whether to distribute the profits, and when, or to retain profits for the needs of the business. In some circumstances a partnership agreement provides for a special allocation of distributions in favor of one or more of the partners.
                 • GENERAL PARTNERSHIP What is a general partnership?
                   • A general partnership is an association of two or more persons, who carry on, as co-owners, a business for profit
                     • JOINT VENTURE
                       • What is it? Legally, a joint venture is like a general partnership that is formed for a short time, usually to complete a particular project.
                       • Advantages A general partnership is simple to form; most states do not require a written partnership agreement (but we recommend it).
                   • FORMATION AND DURATION
                   • MANAGEMENT
                   • LIABILITY
       • DOCUMENTATION What should a written partnership agreement contain?
         • There are no formal requirements for a written partnership agreement. It can include whatever provisions the partners agree on, but it should cover every facet of their relationship.
           • Do we need to document operations in a partnership?
             • Often, other than the initial partnership formation documents that may be required by the partnership acts and local jurisdiction, no other formal ongoing documentation is required.
               • How is a partnership taxed
               • How are my cash distributions from the partnership taxed
               • What is a partner´s basis in his or her partnership interests
               • What happens when the partnership business experiences losses
               • What is phantom income
               • Are there any tax consequences when partners contribute to a partnership

2. What is the most crucial factor in a successful partnership?

   • The relationship among the partners is probably the most crucial factor in a successful partnership.

3. Who can be partners in a partnership?

   • The partnership acts provide that any individual or entity may be a partner in a general or limited partnership.