In the state of California, you can form a partnership fairly easily and inexpensively. There are two types of partnerships: general partnerships (GPs) and limited liability partnerships (LLPs). Partnerships can exist for a particular length of time, or continue indefinitely. The first step in forming a partnership is to choose a name for the partnership. Then, depending on the type of partnership you form, there are a few filing requirements as well as recommended steps that all partnerships should take to ensure success. Once formed, partnerships of any variety must address their tax obligations.
Choose a name for your business. Go to the California Secretary of State website to determine if the selected name is available for your LLP. From the homepage, click on "Business Entities," then "Name Availability." From there, select the "Name Availability Inquiry Letter." Fill out the form online, download it and then mail it with the required fee to the address on the form. For GPs, if the partnership is to operate under any name other than the names of its legal owners, you must file a fictitious business name in the county where the business is located. Contact your county clerk to find out the particular forms needed and information required. Registering a fictitious business name in the county will only prevent other businesses from using the same name within that county.
Draft a partnership agreement, although it is not required by law. A written partnership agreement should outline how you intend to distribute profits, how to remove or add additional partners, when and how the partnership will be dissolved, and other provisions guiding how the business generally will operate. Creating a partnership agreement from the beginning may reduce the potential for conflict as the enterprise expands.
Register with the California Secretary of State. GPs may operate without any filing, but some GPs do file for a Statement of Partnership Authority so that the business is on record with the state. To fill out the form, go to the California Secretary of State website, click on "Forms and Fees" under "Business Programs," then click on "Business Entities." From there, click on "General Partnerships," and then "Statement of Partnership Authority." Fill out the name for the partnership, addresses of all partners, and include a designated registered agent to accept any legal filings. Print out and send the document with the appropriate filing fee to the Secretary of State, Document Filing Support Unit, P.O. Box 944225, Sacramento, CA 942244-2250. You can also deliver the form in person to the Sacrament office at 1599 11th Street 3rd floor, Sacramento, CA 95814. After the form is filed, distribute a copy to each member of the partnership. The form for LLPs is also on the "Forms, Samples and Fees" page. The LLP form is slightly more detailed than the application for a Statement of Partnership Authority in that you must provide information as to the type of business in which the LLP is engaged.
Apply for the appropriate business licenses for your business. Visit CalGOLD (see references) and type in the type of business you are operating. From there, select the county and city in which your partnership is located. You will then see the business licenses you must obtain and where you must file the appropriate forms.
File form 1065 to file with the IRS at the end of each tax year. Further, pay the Limited Liability Partnership Annual Tax and file Form 565 with the state of California.