How To Form a Corporate Partnership

The formation of any business partnership presupposes a mutually beneficial relationship between two or more people. The partnership develops out of a clear understanding that merging financial resources, pooling talent and sharing the workload offers the best prospects for economic success and professional satisfaction.

A handshake, a verbal agreement or a simple written document is all that it takes to create a partnership. However, as the business grows and as the responsibilities of the individual partners become more complex, it may become desirable to further formalize the arrangement through creation of a corporate partnership.

Forming a corporate partnership offers practical and legal advantages. The financial and career obligations of the individual partners can be defined with greater specificity, and a formula developed for the distribution of profits. Giving the business a corporate identity guarantees that the venture’s life will not be dependent on the involvement of any of the partners. If a partner retires, dies or decides to sell his or her share, the business entity can survive. The interests of the other partner or partners will therefore be protected. Most importantly, forming a corporate partnership guarantees that the corporation itself will assume a greater liability for the business than any of the individual partners.

An honest and thorough dialogue is the first and most important step in the creation of a corporate partnership. Prospective partners must be convinced that they share the same vision and will be able to maintain an amicable and productive business relationship. The next step is to check the legal requirements of the state in which the business is located. Although it may be possible to file the necessary paperwork with the state without the assistance of legal counsel, the best course of action is to engage the services of an attorney who is familiar with corporation law. If there is some question whether a single attorney can adequately represent the interest of all parties, each partner should seek separate representation.

In addition to filing necessary incorporation documents with the state, the partners should prepare a detailed business plan that defines the business’ corporate vision, organizational structure and accounting policies, and lays out a clear strategy for success. The plan should be specific, yet allow for flexibility so that the corporate partners can respond to opportunities and challenges, whether expected or unforeseen. Each partner’s involvement in the corporation should be spelled out in detail, to minimize any possibility of contention.