Why Form a Florida Partnership?
If you are considering forming a partnership in Florida, or transitioning an existing business into a partnership, you may have a lot of concerns about how that will affect your overall business structure and bottom line, and whether the benefits outweigh the drawbacks. In reality, there is no one-size-fits-all answer. Whether a partnership is right for you and your business depends entirely on the goals you have and on your specific situation. There can be huge benefits associated with partnerships, as well as increased liability and other drawbacks.
Ultimately, only you can decide whether a partnership is the structure that aligns most with your goals for growing and expanding your business, so the more information you have to make that decision, the better. Below, we have listed some of the key benefits and drawbacks associated with partnership business formation that it is important to be aware of when weighing options. If you would like personalized feedback on the best legal structure for your business, feel free to schedule a free consultation with the SG Firm. The SG Firm specializes in business law and offers business formation and consulting services.
Potential Benefits of Forming a Florida Partnership
- Get Money. One of the largest motivations in forming a partnership is the influx of cash that an investor can bring in exchange for the position of partner. The identity, reputation, and investment of a partner can all be a catalyst for additional investors and faith in the business. The addition of a partner means also connecting with their network of supporters, lenders, and investors. Selecting a partner wisely may open the doors to more financing and fundraising options than were initially available.
- Save Money. Having a partner also means that you have someone to share all business expenses with 50-50 (or however it was agreed to in the partnership agreement).
- Diverse Knowledge and Skills. Adding a partner can be a great way to fill any gaps in skills and knowledge that exist in your business. This can allow you to expand the reach and strength of the business quickly.
- Less Stress. In an ideal situation, adding a partner means halving your current workload and all of the business-related stresses that you are shouldering alone. This can allow for a much better work-life balance.
- Tax Benefits. A general partnership does not pay taxes. Instead, any profits or losses of the business are taxed individually to its partners. This means that there can be potential tax benefits if the partners are able to claim the business’s losses on their own return. However, you would have to consult with a tax specialist about your specific situation in order to be sure how this would affect you.
Potential Drawbacks of a Florida Partnership
- Liability. The biggest drawback of general partnerships is the liability that both partners assume financially. Each partner is financially liable for decisions made by the other in association with the business. In addition, if the business is sued, the partners’ personal assets are vulnerable, whereas the formation of a limited liability corporation (LLC) protects the personal assets by keeping them separate from business assets.
- Loss of Control. When you enter a partnership, you no longer have complete decision-making authority over your business, and this can be very difficult for some people to accept. However, drafting a partnership agreement ahead of time that maps out how decisions will be made, and clarifies each partner’s roles and responsibilities, as well as making a plan for how disagreements will be resolved, can make a world of difference in being able to run a successful partnership.
Talk to a Miami Business Attorney
If you are interested in forming a partnership or other kind of legal business entity, the SG Law Firm is here to help. Schedule a free consultation today, to find out how to take the next step toward growing and protecting your Florida business.