It’s important to lay a sound legal foundation when you go into a business partnership. A business formation attorney in Las Vegas shares some of the key things to consider when forming a business partnership in Nevada.
Choose the Right Partnership Structure
Nevada has several types of partnerships available, depending on your business goals. General partnerships, limited partnerships, and limited liability partnerships vary in the benefits and limitations in terms of liability, management, and financial responsibility.
In a general partnership, for example, all partners share debt and liability equally. In a limited liability partnership, however, each partner is protected from being held personally liable for the obligations incurred by the partnership.
Draft a Partnership Agreement
A partnership agreement defines the rights, responsibilities, and expectations of each partner. It states clearly how profits will be distributed, what the process will be for making decisions, and what each partner will contribute to the partnership.
It’s also a good idea to include terms for adding new partners, and how to exit or dissolve the partnership. A good partnership agreement puts all these details in writing to prevent misunderstanding and to help with potential disagreements.
Decide on Management Roles and Decision-Making Processes
A good working partnership has clear guidelines on who manages what and how decisions are made. Decide on who will handle which aspects of the business, from operations, to finance, to client relations, so you don’t overlap on what each of you in responsible for. Talk about how you’ll make decisions as partners, how voting will work, and if you’ll have veto power on each other’s business-related choices.
Define Capital Contributions and Profit Sharing
Clearly identify the financial contributions that each partner will make, whether that’s money, assets, or services. Establish a profit-sharing formula upfront to prevent conflicts once the partnership becomes profitable. In Nevada, partnerships have flexibility to customize how you will divide the profit and loss.
Plan for Potential Disputes and Resolving Conflicts
Conflicts are inevitable in any partnership. Plan for dispute resolution in advance by including a conflict resolution clause in your partnership agreement. It is good to establish going into the partnership whether you’ll seek mediation or arbitration to try to resolve disagreements outside of court.
Meet Compliance and Registration Requirements
Nevada does not require a formal partnership registration, but you may still need to file with the Nevada Secretary of State if you operate as an LLP or LP. Also, any partnership with employees will need to comply with federal tax requirements, such as getting an Employer Identification Number (EIN) from the IRS.
Address Tax Obligations
Nevada does not impose a corporate income tax, but partnerships may still need to file state taxes depending on their structure and revenue. Limited partnerships, for example, might have franchise taxes and fees based on revenue or employee count. Make sure you are clear on how profits and losses will be divided and reported on individual tax returns, since reporting requirements can vary based on the partnership type.
For help with the legal foundation you need to set up a successful partnership, contact the Hutchings Law Group in Las Vegas, NV.
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