Parties to Partnership Agreement: Understanding Who`s Involved
A partnership agreement is a legal document that outlines the terms and conditions of a partnership between two or more individuals or entities. Before entering into a partnership, it`s essential to understand the parties involved in the agreement, their roles, and responsibilities. In this article, we`ll explore the different parties to a partnership agreement and what they bring to the table.
Partners
Partners are the individuals or entities that agree to form a partnership. They are the primary parties to the partnership agreement and are responsible for contributing capital, skills, and other resources to the partnership. Partners can be individuals, corporations, partnerships, limited liability companies, or other entities.
Partners have a vested interest in the partnership`s success because they share in the profits and losses of the business. Partners are also responsible for making decisions that affect the partnership, including financial and strategic decisions.
General Partner
If the partnership is a limited partnership, it will have at least one general partner. A general partner has unlimited liability for the partnership`s debts and obligations. They also have the authority to manage the business, make decisions, and enter into contracts on behalf of the partnership.
Limited Partner
If the partnership is a limited partnership, it will have one or more limited partners. Limited partners have limited liability for the partnership`s debts and obligations. They are not involved in the day-to-day operations of the business and cannot make decisions or enter into contracts on behalf of the partnership. Limited partners typically provide capital to the partnership in exchange for a share of the profits.
Silent Partner
A silent partner is a type of limited partner who does not participate in the management of the business. They provide capital to the partnership but have no say in the partnership`s decisions or operations.
Partnership Representative
If the partnership is subject to the new partnership audit rules, it must designate a partnership representative. The partnership representative serves as the point of contact between the partnership and the Internal Revenue Service (IRS) in the event of an audit. They are responsible for making decisions on behalf of the partnership during the audit and communicating with the IRS.
Conclusion
A partnership agreement is a critical document that outlines the terms and conditions of a partnership. Understanding the parties involved in the partnership agreement is essential to ensure the partnership`s success. Partners, general partners, limited partners, silent partners, and partnership representatives all have a role to play in the partnership. By understanding each party`s responsibilities, partners can create a strong and successful partnership that will benefit everyone involved.