Partnership FAQ

Questions:

• What is a partnership and how do I create one?
• Are there special rules for running partnerships?
• Is a written partnership agreement required for every partnership?
• How are partnerships taxed?
• Are owners of a partnership personally liable for business debts?
• What happens if one partner wants to leave the partnership?
• What are the differences between a partnership and a limited liability company?
• What is the difference between a general partnership and a limited partnership?

Answer:

What happens if one partner wants to leave the partnership?

Before you go into business together, you and your partners should decide what will happen to the partnership when one partner retires, dies, or wants to leave the partnership for some other reason, such as a divorce or bankruptcy. You might feel like you're being overly cautious or pessimistic, but it almost always makes sense to include "buy-sell" provisions in your partnership agreement to deal with these issues. It's the best way to prevent resentments and serious problems (including messy lawsuits) from cropping up later on.

To learn more about buy-sell provisions, see Plan Ahead for Changes in Corporate Ownership.