Iron Sharpens Iron: Forming a Legal Partnership

Iron sharpens iron. There is a mutual benefit in rubbing two iron blades together. Edges earn greater tensile strength and toughness. The metal loses its dullness and gleam brightly. Blades are sharpened, each made more efficient, ready to cut and slice.

Likewise, a good partnership lend itself to strengthening the two parts. Both parts, striving to help the other find strength and shine under pressure.

It is easy to see the benefits of starting a partnership when you meet someone who shares your values, someone you really feel you can trust, someone ready to share a vision for the future. As Aristotle said, “The whole is greater than the sum of its parts.” Batman & Robin. Tom & Jerry. Han Solo & Chewbacca. Salt & Pepper…need I say more?

One of the many benefits of a partnership is when one party has the skills to make a business successful, but not enough money. Occasionally, not having enough time due to a second job makes the convenience of a partnership attractive. Emotional support and someone to test your ideas with cannot be underestimated. And sometimes you simply want to partner up with someone who really, really knows the business and can help you develop as a professional.

The birth of a partnership happens with the magic that is 1) the agreement to form an endeavor, coupled with an 2) understanding of ownership interest and responsibility of each partner-member.

Potential partners need to:

  1. Choose a business name and check for availability
  2. Register the business name with local, state, and/or federal authorities
  3. Draft and sign a partnership agreement (although not legally required, this comes highly recommended)
  4. Obtain any required local licenses
  5. Determine any tax liabilities or obligations that the partnership has
  6. Obtain an EIN if necessary and open a bank account for the business (again, not required legally for all partnerships, but it is highly recommended to keep business finances separate from personal accounts)

As pointed out, partnership agreements are highly recommended, even in the limited and simplest of partnership endeavors. The agreement would normally express the essential features of the partnership, such as the amount of capital or kinds of services that each partner is responsible to contribute. It should also determine how losses and profits are shared, express the identity and powers of the partners, and should detail other important matters related to the partnership.

As no partnership is alike, downloading boilerplate agreements from the internet comes with risks, and I advocate having an experienced attorney review each document before signing. These agreements are complex, and partners should consult with an attorney on protecting their interests.

How our Law Firm can help: A law firm is indispensable in forming and dissolving partnerships. The Stanley Law Group can assist you and your partner in this area by crafting specific agreements that fit your need. Please give us a call at (540) 721-6028 for further information on setting up your new partnership for success.

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