How to Structure Your Partnership in California

A partnership is created whenever two or more people agree to do business together for a profit. Additionally, partnerships should ensure that they follow sound business practices once they begin their new venture.

Steps in Forming a Partnership

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The first step to forming a partnership is choosing its name.  In California, a partnership may use the last names of the individual partners or any fictitious names. If a fictitious name is used, it must be distinguishable from the name of any business name that is currently on record.  Before choosing the name, a search should be run in the following databases such as California Secretary of State or The United States Patent & Trademark Office.   If a fictitious name is used, the state of California requires that a fictitious business name statement is filed in the office of the county clerk where the partnership intends to do business.  The fictitious business name must also be published in the county newspaper for four weeks.

The next step in creating a partnership is to draft and sign a partnership agreement.  While this document is not required by law, it is a crucial step in order to avoid any conflicts or miscommunications between the partners.  A well-drafted partnership agreement will set out in advance how to deal with some issues should they arise.  Some examples of what partnership agreements should cover are:

  1. Each partner’s contributions to the partnership,
  2. The allocation of profits, losses, and draws,
  3. The partners’ authority and management duties,
  4. Voting rules for decision-making,
  5. How to admit any new partners,
  6. The withdrawal or death of a partner, and
  7. How to resolve disputes.

A partnership agreement can be amended at a different date should circumstances change.

Another important step in the process of creating a partnership is to obtain any business or professional licenses depending on the type of business the partnership will engage in.  The State of California provides a comprehensive database of every profession that requires a license by a partnership.  It is also important to ensure any local regulations, including licenses, building permits or zoning clearances are obtained. Partnerships that wish to have employees will need to obtain an Employer Identification Number, or EIN.  Finally, in California businesses are required to report taxes and file various employee reports.

Discuss Your Business Plans with an Experienced San Jose Business Attorney

When creating a partnership in California, we recommend that you contact our San Jose corporate lawyers at Structure Law Group, by calling 408-441-7500 or emailing us to discuss your own particular situation.

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