A general partnership is one of the simplest forms of business structures that can be established. It involves two or more partners pooling their resources and skills to run a business together. Unlike other business structures, such as limited liability corporations (LLCs) or corporations, general partnerships do not need to be registered with the state. However, there are still several steps you should take if you want to create a general partnership in Kansas. This article will guide you through the process.
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Step 1: Decide Whether a General Partnership Is Right for You
Before you go any further, you need to decide whether a general partnership is the right business structure for your needs and goals. Some of the advantages of a general partnership include:
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- Ease of formation: General partnerships do not require any registration with the state, and there are no formal requirements for creating one.
- Flexibility: Partnerships have more flexibility than corporations or LLCs when it comes to how they are managed and taxed.
- Shared responsibility: Partners share both the workload and the risks of the business.
However, there are also some potential drawbacks to consider, such as:
- Personal liability: Each partner is personally liable for the debts and obligations of the business, even if they did not directly cause those debts or obligations. This means your personal assets could be at risk if the business runs into financial trouble.
- Lack of centralized control: Since each partner has an equal say in how the business is run, there is potential for disagreements and conflicts.
Step 2: Form a Partnership Agreement
Even though you do not need to file any paperwork with the state to create a general partnership in Kansas, it is a good idea to create a partnership agreement. This is a legal document that outlines each partner’s rights and responsibilities, how decisions are made, and the responsibilities of the partnership as a whole. A partnership agreement can help ensure that everyone is on the same page and can avoid conflicts down the road.
When drafting a partnership agreement, consider including the following:
- The names and addresses of all partners
- The name of the partnership
- The purpose of the partnership
- The contributions (cash, property, services, etc.) that each partner is making
- The percentage of ownership that each partner has
- How profits and losses will be divided
- The duties and responsibilities of each partner
- How decisions will be made and what happens if there are disagreements
- The procedures for adding new partners or removing existing ones
- How and when the partnership will be terminated
Step 3: Obtain Any Required Licenses and Permits
Depending on the type of business you want to operate, you may need to obtain certain licenses or permits from the state or local government. For example, if you plan to sell alcohol, you will need to obtain a liquor license from the Kansas Department of Revenue. You may also need to obtain zoning permits or business licenses from your local government. Check with your city or county to determine what licenses or permits you may need.
Step 4: Acquire an EIN
An Employer Identification Number (EIN) is a unique number assigned to businesses by the Internal Revenue Service (IRS). Even as a partnership, you will need to obtain an EIN if you plan to hire employees or pay taxes. You can obtain an EIN for free on the IRS website.
Step 5: Open a Bank Account
Once you have obtained your EIN, it is time to open a bank account for your partnership. You will need to provide the bank with your partnership agreement, your EIN, and other relevant documents. It is a good idea to keep your business and personal finances separate to avoid confusion come tax time.
Step 6: Register Your Business Name
If you plan to use a name for your business other than the names of the individual partners, you will need to register your business name with the Kansas Secretary of State. This can be done online through the Secretary of State’s website.
Conclusion
Creating a general partnership in Kansas is a relatively simple process, but there are still several steps you should take to ensure that your partnership is structured correctly and compliant with state and local regulations. By following the steps in this guide, you can establish your partnership with confidence and set your business up for success.
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