How to Change Ownership From a Proprietorship to a Partnership

By David Carnes

If you are a sole proprietor, it is easy to form a partnership -- simply agree with at least one other person to do business together and share profits and losses. Your company will automatically be treated as a general partnership for legal purposes, even with nothing more than a handshake to seal the agreement. The resulting partnership could face significant legal liability, however, unless you resolve certain matters and create a written partnership agreement.

Step 1

Invite partners who are capable of making contributions to your business. These contributions may be tangible contributions such as money or equipment, or intangible contributions such as expertise or business connections.

Step 2

Select a name for the partnership. Make sure that it is unique by searching state records to see if an identical or confusingly similar business name is in use. The website of the secretary of state of your state may have an online name search function. Some states require a general partnership's official name to include the names of the partners.

Protect your loved ones. Start My Estate Plan

Step 3

Negotiate the basic terms of the partnership with the other partners. Important issues include partner contributions, the distribution of profits and losses, voting rights, the departure of partners, the entry of new partners, the authority of each partner, the partnership management structure and dispute resolution procedures.

Step 4

Draft a partnership agreement reflecting the terms you negotiated with the other partners, and have all partners sign it. The partnership agreement does not have to be filed with state or federal authorities. Without a partnership agreement, a court will apply state law default rules to resolve disputes among the partners.

Step 5

Select a fictitious business name and register it with your state's secretary of state, if you wish to do business under a name other than the name of the partnership.

Step 6

Obtain any required additional licenses, if you are expanding your line of business after forming the partnership. If your sole proprietorship required licenses to operate, you must have them re-issued in the name of the partnership to continue to use them.

Step 7

File formation documents with your state's secretary of state if you wish to form a limited partnership, limited liability partnership or a similar limited liability entity. Pay any requisite fees.

Protect your loved ones. Start My Estate Plan
How to Convert a Sole Proprietorship to a Partnership in Maryland
 

References

Related articles

How to Change From an LLC to an LLP

Converting from an LLC, or limited liability company, to an LLP, or limited liability partnership, differs from state to state. While most states permit LLCs, some states do not authorize LLPs. Always check with your Secretary of State to learn if you can convert to an LLP, and identify the form or format required. Changing to an LLP can get a bit complicated at times. For example, if you now have a one-member LLC, you'll have to create a formal partnership agreement, naming all the partners, their ownership percentage, how profits will be divided and all other partnership management details.

South Carolina LLP Laws

South Carolina law regulates how a Limited Liability Partnership, or LLP, may form, operate, and ultimately dissolve. Unlike limited partnerships or general partnerships where one or more partners are personally liable for the debts of the business, an LLP limits liability for all partners. Each partner may participate in the management of the business, and receive a portion of the profits.

What Constitutes a Legally Binding Business Partnership?

A partnership is a common legal structure that two or more people can use to manage a business together. The business is formed as soon as two individuals start doing business together, but you may formalize the arrangement by registering with the state or drafting a partnership agreement. The business owners of a partnership have flexibility in how they want to run the business, while the partners remain personally liable for the debts and responsibilities of the business.

LegalZoom. Legal help is here. Start Here. Wills. Trusts. Attorney help. Wills & Trusts

Related articles

How to Open a General Partnership in Florida

Florida law does not require general partnerships to register with the state or to obtain a state business license. ...

General Partnership Laws & Regulations

A partnership is a form of business entity owned by more than one partner. The key consideration is that the business ...

Steps for Dissolving a Partnership in South Carolina

Knowing the process for ending a general partnership can help partners effectively wrap up business affairs when it ...

How to Make Your Spouse a Legal Business Partner in Property

It is possible to add your spouse as a legal business partner -- in fact, this happens automatically under state law as ...

Browse by category
Ready to Begin? GET STARTED