When you are starting a business, there are several different kinds of structures you can choose to maximize your profit potential.
One of those structures is known as a partnership, in which you go into business with another person or a group of people who share the risk and the rewards of your new company.
But while partnerships may yield success, you should be aware of some of the legal implications of a business partnership.
When Starting a Business With a Partnership, You’re Responsible for Partners’ Actions
Whether you form a partnership with just one other person or with multiple people, you are legally responsible for anything they do when they act as part of your company.
That means that if one of your partners commits fraud or does something else that is illegal, you would bear responsibility for that action. That’s why it’s so important to choose partners that you trust to always do the right thing.
The same liability applies to all debts and losses the business occurs, unless you choose a limited partnership or limited liability partnership, which eliminates your liability for the actions of another partner.
Partners Can Legally Sue Each Other
When you enter into a business partnership, any partner can sue another partner for money that is owed them through the partnership.
And the partner can file suit even if it is not the fault of the other partner or partners that the payment remains outstanding.
In other words, if a vendor fails to make a payment and that failure means that one of the partners in the business doesn’t get paid, the partner who was shorted the money can sue the partner who found the vendor.
You Are Bound To Contracts Any Partner Signs
If one of your business partners signs a bad contract on behalf of the company that you don’t like, you are legally bound to fulfill that contract even if you hate the terms of the deal.
This again underscores the importance of ensuring that all business decisions are discussed with every partner before anyone signs on the dotted line.
Providing Legal Help For New Businesses
Starting a business often involves a lot of legal paperwork, and if you try to do things yourself, or you hire a business law firm that lacks experience, you may end up paying for it in the future. To prevent that kind of a disaster, you should hire a legal firm that has an understanding of the complexities of business law, and that can advise you about potential pitfalls and advantages of the legal structure of your business. The attorneys at Peter M. Feaman, P.A. have the expertise to help you achieve your goals. Contact us today for a free legal consultation.