How to Prove a Business Partnership Exists

By Elizabeth Rayne

Whenever two or more people decide to carry on a business together, a partnership is formed. Two types of partnerships may exist: general partnerships and limited liability partnerships. Limited liability partnerships are officially registered with the state, and the partners are not personally liable for the debts of the business. No formal paperwork is required to create a general partnership. Partnerships of either variety have several ways to prove that their business arrangement exists.

Draft a Partnership Agreement

A partnership agreement is a written document that outlines how the partnership is managed, who contributes what assets, and how profits are divided between the partners. It is not a legal requirement in most states, but it may prevent conflict within the partnership down the line. A partnership agreement is considered a legal contract. You may use a partnership agreement to prove the existence of a partnership.

File For a Fictitious Business Name

To do business under a name other than the names of the partners, register a "fictitious" or "doing business as" name. Depending on the laws of your state, you may file this with the secretary of state or a county clerk where you are doing business. The fictitious-name certificate will demonstrate when the partnership came into existence.

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Furnish Copies of Schedule K-1

On an annual basis, partnerships must furnish copies of Schedule K-1 (Form 1065) to each partner. Schedule K-1 will list each partner's share of the profits, losses and liabilities. Every partner will use Schedule K-1 on her personal tax return. Schedule K-1 may be used to prove the annual income or loss of the partnership for every year of its existence.

File Certificate of Partnership Authority

Some states, such as New Hampshire, allow partnerships to file a Certificate of Partnership Authority. In most states, the application will include your partnership agreement. Filing the certificate will prove the existence of your partnership, and will also put the partnership agreement in the state's file. Having the partnership agreement registered may help the partnership avoid conflict in the future.

Register a Limited Liability Partnership

A limited liability partnership is a formal business entity where the partners are not personally liable for the debts of the business. This means that if the partnership is sued, the individual partners will not have their personal assets on the line. To file for a limited liability partnership, generally you must file articles of incorporation with the secretary of state in the state where your business is located. There is usually a filing fee to submit the articles, and some states have additional business entity taxes for limited liability partnerships. By showing the filed articles of incorporation, you will prove that a partnership exists.

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References

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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.

Do General Partnerships Require a DBA?

DBA, or doing business as, occurs when a business operates under a name other than its legal name. A general partnership can always choose to use its legal name, which is the combination of the names of the partners; a DBA is not required. If the partnership chooses to operate using a name other than its legal name, however, many states require that the business register this name.

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 soon as you agree with your spouse to do business together and to share profits and losses, even if your agreement is only verbal. You must, however, actually be doing business -- merely owning property as husband and wife is not enough to form a legal partnership, although it may confer joint ownership. Although you do not have to execute a written partnership agreement, a partnership agreement is critical to avoiding disputes.

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