When starting a business, you can choose to organize it in one of four general ways: a corporation, a sole proprietorship, a limited liability company, or a partnership. A partnership is usually the default choice for two or more people if they do not wish to start an LLC or a formal corporation.
Partnerships are generally easier and less expensive to set up than corporations or LLCs, and they can be easier and less expensive to run as well. As such, partnerships can be the simplest form of business to set up and operate for multiple owners.
Even though it is one of the simplest business forms, a partnership must be formed by following some necessary steps. Here are a few steps to get you started:
1. Choose a Business Name
Once you have chosen a name for your business, check its availability online at the Office of the Secretary of State of Arizona. If you’re forming a limited partnership, the words “limited partnership” or L.P. need to be included with the name.
2. Register Your Business Name with Local, State, and/or Federal Authorities
If the name of your partnership doesn’t contain your name or the names of your partners, you need to file a certificate containing the names, addresses, and signatures of all partners.
A statement of partnership authority can be filed with the Office of the Secretary of State of Arizona. If you’re forming a limited partnership, you must have an office in Arizona, and you must obtain an agent for service of process in the event that your L.P. is sued. You must also file a certificate of limited partnership with the Office of the Secretary of the State of Arizona.
3. Draft and Sign a Partnership Agreement
A partnership agreement lays out the rights and responsibilities of the partners.
4. Take Care of Tax and Other Regulatory Obligations
Request an Employer Identification Number from the IRS by applying online at their website. You can find Arizona tax forms for partnerships on the Arizona Department of Revenue website. Arizona law requires employers to use the E-Verify system and notify IRS and the State of Arizona if an employee is hired.
5. Open a Business Bank Account
It’s always a good idea to keep your business account separate from your personal account. You will probably need a Tax ID number and a copy for your partnership agreement to open a business bank account.
Even though forming a partnership is the easiest option for potential business owners, it still requires a good amount work. If your necessary documents are not filled out properly, you may have to spend more time and money filling them out a second time. Starting a partnership is a big decision, and you will want experienced legal advice to successfully guide you through the process.
Call JacksonWhite’s Small Business Law Team at (480) 464-1111 to discuss your case today.