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If you are asking yourself, “How do I start a partnership in New York?” you’ve come to the right place. At John F. Dennehy CPA, our business consulting experts have helped several entrepreneurs and business owners throughout the New York area navigate the process of starting partnerships.
Due to the various types of partnerships available and the steps required in forming this type of business entity, it can seem a bit daunting. But it doesn't have to be. The team at John F. Dennehy CPA offer tailored solutions to help you achieve your goals. Don’t hesitate to contact us today. In the meantime, continue reading to learn how to form a partnership in New York.
When forming a partnership, it is important to consider liabilities and taxation before anything else.
Compared to other states, New York has more options to choose from in terms of taxation. It’s important to remember that any partnership which requires a federal partnership income return to be filed also needs to file a partnership income tax return with the state (only if revenue came from within New York).
Liabilities deal with how personally responsible individuals are for any debts and obligations associated with the business. For example, if you choose to be completely liable for your business’s debts, then your personal assets can be used to settle business-related obligations.
Because of this, many individuals choose partnerships that offer limited liability in order to protect personal assets.
When it comes to how to form a partnership in New York, there are no one-size-fits-all solutions. In fact, there are several different types of partnerships you can form.
A general partnership (GP) is when two or more individuals get together to do business under the condition that they share full liability for any of the business’s liabilities. General partners are responsible for filing the profits and losses associated with the business on their personal income tax returns.
A limited partnership (LP) is when two or more people go into business together, however, the general partner is in charge of running the business while the limited partner(s) are only liable up to the amount of money they put down as their investment.
The biggest advantage of being a limited partner is the general partner takes on the bulk of the risks associated with the business. Because limited partners are only liable for whatever they invest, it is often referred to as a protected investment.
Unlike an LP, a limited liability partnership (LLP) allows all the partners to enjoy limited liabilities and to be involved in the management of the LLP. This type of partnership is often chosen by professional service businesses, such as accounting firms, law firms, and financial service firms. The reason behind this is that partners of an LLP are not liable for the malpractice or negligence claims associated with other partners.
Many business owners often get LLPs mixed with a limited liability corporation (LLC). We've created a helpful article on how to create an LLC in New York, which can offer more insight into the differences.
In general, the process of forming a partnership in New York is straightforward. Here are the following steps you should take to create a partnership.
All businesses that file a partnership must contain the entity within the name. For example, the proper name of an LLP company named "Fawkes & Lucas Law Firm" would be "Fawkes & Lucas Law Firm, LLP." Before settling on a name, it is important to know the list of restricted words forbidden by the state of New York.
Business owners must check the list of available names in the Department of State’s Business Database before filing.
In New York, each partnership requires specific paperwork to be completed in addition to the filing fee.
General partnerships must file a Certificate of Assumed Name
Limited partnerships must file a Certificate of Limited Partnership and a partnership agreement
Limited liability partnerships must file a Certificate of Registration and a partnership agreement.
Acquiring an EIN is a free service offered by the IRS which can be applied for by mail, phone, fax, or online.
Businesses must file a Certificate of Authority in order to acquire a sales tax number. Any business must complete this step before conducting any type of sales in the state of New York.
The process of creating a partnership can be challenging and confusing — to say the least. However, the team at John F. Dennehy Jr. CPA can help guide you successfully through.
Contact John F. Dennehy Jr. CPA today.
We at John F. Dennehy CPA are a team of certified public accountants who service clients throughout Long Island. The services that we provide are comprehensive, and we can resolve multiple accounting needs for a client.