Richland County Attorneys Advise Business Partnerships

Columbia lawyers tailor agreements to individual goals

Many businesses are organized as a partnership, a shared-ownership structure based on mutual contribution and joint liability. There are often good reasons for adopting this form of organization, such as a flexible management structure and a pass-through tax entity. The knowledgeable lawyers of Willard Montgomery LLC have helped South Carolina businesses organize and maintain partnerships that serve their specific needs.

Understanding the partnership model

A partnership is business organization in which two or more individuals agree to share ownership, responsibilities, profits and liabilities. Each partner contributes resources, participates in decision-making and — with certain exceptions — is personally accountable for the business’s debts and other financial obligations. Partnerships are useful for getting a start-up running quickly or for engaging in a closely held business while avoiding the procedural requirements and expenses of a corporation.

Different types of partnerships

A traditional partnership may be general or limited. In a general partnership, all the partners have a right to participate in management and all are personally liable for the entity’s debts. In a limited partnership, there is at least one general partner who manages the partnership’s business and is personally liable for its debts and other obligations. It also has limited partners, who have no management role and who are liable for debts only up to the amount of their investment.

Other types of partnership exist under statutory law, such as the following:

• Limited liability partnership (LLP) — In this type, all partners may participate in management, but are not liable for most of the entity’s debts. This form is often used by professionals.
• Limited liability limited partnership (LLLP) — This is like a limited partnership, except that the general partner also has limited liability. It is useful for real estate and investment projects.

We can help you select and organize the type of partnership best suited for your particular business.

Benefits of business alliances

A business partnership has a number of benefits for its members, such as:

• Sharing the workload between the partners
• Splitting the costs of business
• Passing along tax liability to the partners
• Avoiding the procedures and filings required for corporations

In addition, partnerships allow customized allocation of profits and losses, which can help attract financers and contributors seeking return on investment.

Risks of a poorly constructed partnership agreement

Entering a partnership requires a well-thought-out plan that takes into account all parameters of operating the business. Without a strong agreement, state laws may apply that can leave partners vulnerable to liability and put the partnership on shaky ground. The following are some of the risks:

• Unclear profit and loss sharing — By default, profits and losses are split equally, even if one partner invested more money or effort.
• Ambiguous decision-making authority — Without agreed rules, every partner has equal say, which can lead to deadlock or conflict.
• Unlimited liability exposure — Each partner might be held personally liable for the debts and obligations of the partnership, including those caused by another partner’s misconduct.
• Difficulty handling disagreements — Without an agreed upon process for resolving membership disputes, they can escalate into costly litigation.
• Uncertain exit strategy — If a partner wants to leave, there may be no clear rules for buyouts, valuation or transfer of interest.
• Risk to continuity — Death or disability of a partner can disrupt the business. Without clear succession terms, heirs may inherit partnership rights, creating unwanted new partners.

Our skilled attorneys can assist you in negotiating and drafting a clear and effective agreement that can provide stability for the organization and its owners.

Contact an established Columbia law firm to address your partnership needs

Montgomery Willard provides effective legal representation to members of partnerships throughout South Carolina. To arrange a consultation, call us at 803-470-0722 or contact us online.