The first benefit is simplicity. If you and at least one other person are attempting to get a venture off the ground, a partnership may be your quickest way to do so. In fact, partnerships can be formed without the partners ever actually doing so, such as in a “de facto” partnership where the intentions of the partners are enough to make the existence of a partnership a reality. There is no requirement that a formal Partnership Agreement exist, and there is no State of Texas filing requirement with the Secretary of State. Shake hands, exchange an email or two, and you can be going. Now, the advice of your attorney will always be to memorialize all business dealings in writing through a custom drafted Partnership Agreement, but this is just an example of how quickly a partnership can actually be created.
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Secondly, taxes for a partnership are “pass through” meaning that taxes are only paid one time: on the personal income return of each partner. The partnership itself does not pay taxes, as opposed to a corporation where taxes are paid both at the corporate level, as well as the individual level on any distributions or dividends. If you and two business colleagues form “San Antonio Business Consulting Partnership” and the business generates $300,000 in the first year of business, that income is only taxed to each of the three partners—Each partner pays tax on $100,000.00 on their own personal return. The partnership itself does not file a tax return for the purpose of paying taxes, but MUST file an information return to report the income.
The third main benefit is that management is conducted equally by all partners. Whereas in a corporation or LLC, management may be reserved to select classes of owners or members, the partners in a partnership share equal management responsibility of the partnership. Partnerships can be attractive for professional practices where all the professionals in the partnership would share equal responsibility for making managerial decisions instead of deferring to one or two managers.
Partnerships are attractive and effective entity structure choices when setting up your business. While they can be very simple to set up, it is still usually advisable to consult with an attorney who can draft a partnership agreement that protects the interests of the parties involved. San Antonio Business Attorney Nathaniel Gilbert offers flat fee partnership and LLC formation and management packages for businesses in Texas. To consult with Nate directly regarding any questions you might have, Click Here. To read more about Business Law and Management in Texas, Click Here.
