You need to decide which kind of partnership you want to create, as there are several different kinds. General partnerships are the most common kind of partnership, and partners are entirely personally liable for all partnership debts; limited partnerships (LPs) allow for both limited and general partners, and the limited partners will not be liable for business debts beyond their own investments in the business although general partners will remain fully liable for an LP’s debts; limited liability partnerships (LLPs) afford protection to partners from business liabilities they had no hand in creating themselves; and limited liability limited partnerships (LLLPs) allow limited partners to have liability for business debts capped at the total amount of their investments.
Choose Your Partnership Name
A partnership in Texas can use the surnames of individual partners, or it could use a fictitious business name. When choosing a fictitious name, that name has to be distinguishable from the name of any other company currently on record to avoid common law and federal trademark law protections.
You can make sure your business name is available by running a search in such government databases as the Texas Comptroller of Public Accounts and the United States Patent & Trademark Office (USPTO).
Register Your Business Name
You are able to check with the Texas Secretary of State to ensure a business name is available and then protect the new business name by filing it with the Texas Secretary of State. You have to register the business name with the County Clerk’s Office in the county where the business will be located, and an Assumed Name Certificate is the form to register an assumed business name with a filing fee of $10 to $15, depending on the county.
Draft and Sign a Partnership Agreement
Required paperwork can vary depending on the type of partnership you are creating. General partnerships do not need to register with the Secretary of State beyond filing an Assumed Business Name Registration (DBA) although partnership agreements should be recorded, LPs have to file a Certificate of Limited Partnership, LLPs must turn in Registration Applications with the Texas Secretary of State, and LLLPs can choose to enhance liability protections by registering as LLLPs and filing Applications for Registration of LLPs with the Texas Secretary of State.
A partnership agreement will not be a legal requirement for establishing a partnership, but it remains important to ensure there will be no misunderstandings between partners. Some of the issues that should be addressed in a partnership agreement may include each partner’s contribution to the partnership, allocation of profits, losses, and draws, voting rules for decision-making how to admit any new partners, the authority of partners and their management duties, what happens upon bankruptcy, withdrawal, or the death of a partner, and how to resolve disputes.
Obtain Necessary Licenses, Permits, and Zoning Clearance
A business could need to get business or professional licenses depending on the type of business activity it will be engaged in. Texas has a comprehensive Texas Occupational Licenses and Permits website for every occupation requiring a license by a partnership.
Certain local regulations, such as licenses, building permits, or zoning clearances could also apply to your partnership. You must check with your city and county governments for additional information.
Determine Whether You Need an Employer Identification Number (EIN)
The Internal Revenue Service (IRS) requires partnerships to obtain EINs, which are nine-digit numbers issued by the IRS for tax reporting purposes. Partnerships will need EINs regardless of whether or not they will have employees, and registering for an EIN can be performed on the IRS website.
Businesses in Texas must report taxes and file various employee reports, and you could need an EIN when you are registering your business to report taxes through the Texas Comptroller of Public Accounts. When you do have employees, you must report and pay employment taxes periodically by registering through the Texas Workforce Commission (TWC).
Additional Steps
After creating a partnership, several other steps will be important for getting your business off the ground. Make sure to open a business bank account so you can keep business and personal finances separate.
Also be sure to obtain general liability insurance so you can have financial protection against any unforeseen events. Then plan to report and pay taxes as required by law.
Call Us Today to Speak with a Texas Partnership Attorney
Are you hoping to form a partnership in Texas? You are going to want to be sure you are working with an experienced Texas partnership lawyer who can help you navigate all of the requirements involved.
Structure Law Group, LLP, knows how stressful and confusing it can be for people to set up partnerships, but we work very closely with our clients so they get the advice they need to always make the right decisions. You can call (512) 881-7500 or contact us online to schedule a consultation with our Texas partnership attorney.