The Basics Of Florida Partnerships
You will often hear people who go into business together say that they are forming a “partnership.” This word has come to mean anybody that wants to do business together, but in reality it has a specific legal meaning. A partnership is a legal entity with its own set of rules under Florida business laws.
Types of Partnerships
At the very core of any partnership is the agreement for people to go into business together and for them to share in the profits and losses of the company (although partnership law doesn’t require that they need to share in those factors equally).
There are two primary forms of partnerships in Florida. The first is a general partnership. This is where all the partners will share in the obligations, duties and responsibilities of the business’ operations. Limited partnerships are where there may be partners that are “silent,” or who will share in profits and losses, but who may not have any operational control over the business.
Often, limited partners may have some protection should the business or should other partners get sued. This can help a business raise money from potential partners who may be willing to share the risk of financial loss but who do not want to share in the risk of any legal liability.
Partners need to make an initial contribution to the business, but that contribution doesn’t need to be money. It can be expertise, facilities, or property that a partner owns.
The Partnership Agreement
A partnership agreement should always be drafted, but Florida law doesn’t actually require a written partnership agreement. Additionally, if you have an oral partnership agreement, Florida law requires that you keep a detailed list of partnership actions so much so that it actually becomes easier just to have a written partnership agreement.
Your partnership agreement is important; it can prevent unnecessary lawsuits over “he said-she said” disagreements and tells the partners what they can expect and what is expected of them. Some things that go into a typical partnership agreement may include:
- How profits and losses are shared
- Who contributed what to the partnership and whether those contributions are gifts, loans or leases top the partnership
- Whether partners have a right to employment or just status as a partner
- Who has control over what decisions on behalf of the partnership—in other words, management responsibilities.
- Which partners vote, how much their votes count for, whether there is proxy voting, how meetings are held, and other voting related issues.
- How new partners are admitted, and how to get rid of partners, whether the partner needs to be excluded voluntarily or involuntarily. This includes what to do if a partner’s interest is lost by death, divorce, or creditor action
- Who will be liable for corporate debts in the event there is individual liability.
Call the West Palm Beach business litigation attorneys at Pike & Lustig today for help in your business law case, or for help in forming your new business venture.