Like a sole proprietorship, a basic partnership is formed by default if two or more individuals begin operating a business together. In some cases, a partnership may even be formed when that is not the intent of the individuals. Therefore, as a word of caution if you are doing any work with another individual it is important to talk to your attorney to make sure you are not entering into a partnership when you do not want to.
Because a partnership is formed by default, no formal documents are need to form a partnership. The same rules that applied to a sole proprietorship, i.e. you need to make sure you have the proper licenses and tax forms filed, also apply to partnerships. However, in addition to these documents there are two more documents that partnerships will want.
The first document is, if the individuals determine they do not want a basic partnership, the filing of a document creating a Limited Liability Partnership (LLP), Limited Partnership (LP), or a Limited Liability Limited Partnership (LLLP) with the Colorado Secretary of State. These entities may offer some protection for various owners. To determine if one of these entities is right for your partnership, a discussion with your attorney would be in order.
The second document is the partnership agreement. Although it is not absolutely required in all situations, all partnerships should have a partnership agreement regardless of whether they are a general partnership or have chosen to file with the Secretary of State to create another partnership type. A partnership agreement helps ensure that any disagreements can be settled, or if they cannot be settled, what happens to the assets of the partnership.
If you have formed a partnership or are working with another individual and wonder about whether you have formed a partnership, please feel free to call me, your Denver business lawyer, at 720-258-6647, email me at email@example.com or contact me through my contact form.