Things to Know When Starting a Partnership in Utah
Partnerships are an exciting venture. You and another person or multiple individuals have a great idea for a product or service that you want to market to the world and make a profit from. Along with the excitement of a new opportunity, there are also many legal details to handle before you even speak to your first client. Below, one of our Utah business law attorneys outlines the important things to consider before starting your partnership.
Choose the Type of Partnership
There is more than one type of partnership in Utah. The most common are as follows:
- General partnership (GP): In a general partnership, two or more people jointly own the business and share in its profits, losses, and management. Formal registration is not required to form a GP but all partners have unlimited personal liability for business debts. General partnerships don’t provide liability protection for the partners, so consider carefully whether this is the type of partnership you want to form.
- Limited partnership (LP): An LP has at least one general partner who has unlimited personal liability and one or more limited partners, with their liability limited to their investment. LPs are often used in family partnerships where there is one or more general partners taking on the personal liability of the partnership.
- Limited liability partnership (LLP): LLPs are most commonly used by professionals such as accountants and lawyers. All partners have limited liability for the business’ debts.
- Limited liability company (LLC): LLCs are often managed and taxed as partnerships. They provide limited liability protection for each of its members or partners as long as they are managed properly.
Draft a Partnership Agreement
It is always advised that a partnership agreement is drafted even when not required, such as in a GP. A partnership agreement can clarify roles and avoid disputes. Generally speaking, these agreements should address:
- Roles, responsibilities, and management authority
- Profit and loss sharing percentages
- Procedures for handling a partner’s exit due to death, disability, or sale of interest
- Dispute resolution methods
Register the Name and Business
There are a few steps involved when registering your name and business. They are as follows:
- Create a business name and ensure its uniqueness by searching the database at the Utah Division of Corporations and Commercial Code.
- You must designate a company or individual with a physical address in Utah, called a “Registered Agent” to receive legal notices.
Legal and Licensing Requirements
You will also need certain licenses and insurance requirements. These include the following:
- The majority of partnerships require a business license from the county or city where they operate, such as Utah County, or Salt Lake City. It’s important to understand the business license requirements for your individual municipality.
- You must also obtain all necessary insurance, including professional liability, general liability, and workers’ compensation if you plan to hire employees.
Our Business Law Attorneys in Utah Can Help Form Your Partnership
It is critical to have legal guidance when forming a partnership. At AGS Law, our Utah business law attorneys can provide it. We can help you choose the business structure right for you, draft an agreement that will avoid costly disputes in the future, and advise on how to register your business and ensure tax, financial, and legal compliance. Call us now at 801-477-6144 or fill out our online form to schedule a consultation with one of our experienced attorneys and to learn more about how we can help with your case.
Sources:
le.utah.gov/xcode/Title48/Chapter1D/C48-1d_1800010118000101.pdf
commerce.utah.gov/corporations/online-registration-instructions/