Forming a Partnership in Ohio

A partnership is formed automatically under Ohio law, whether intended or not.  In Ohio, a partnership is formed by "any association of two or more persons to carry on as co-owners a business for-profit..."  Ohio Revised Code section 1776.22.  This is known as a General Partnership and it is the default business that is formed when two or more people start doing an activity that makes money.

General Partnerships in Ohio

A General Partnership does not have to register with the Secretary of State in order to conduct business in Ohio.  A partnership is a distinct entity from the partners.  However, a General Partnership does not enjoy the protection from liability that a LLC enjoys.

In a General Partnership, each partner is an owner and can take nearly any action they like in the partnership name.  However, each partner is personally liable for all business debts and obligations.  This means that one partner is liable for business debts entered into by the other partner, even if they did not know about it.  

There are certain measures that a partnership can take to safeguard itself against some of the pitfalls that come with partnerships.  

Business Partnership Agreement

A partnership agreement is a written document that effectively creates a rule of law as between partners.  The partnership agreement spells out the duties and ownership stakes of the partners.  The partnership agreement can limit and dictate authority of the partners.  The partnership agreement also provides for how to admit new partners, expel current partners, sell stakes in the partnership, and how to dissolve and wind down the partnership.

It is very important to have the partnership agreement written by an attorney, especially an attorney familiar with the laws of the State of Ohio and how those laws will affect your partnership agreement.  There are many free partnership agreement templates on the internet, but it is a terrible idea to use one.  Attorneys know the problems with 'stock' partnership agreements because attorneys see all the problems they cause when the inevitable dispute arises in the partnership.  

The partnership agreement is a binding agreement under Ohio law.  Most stock partnership agreements provide that a complete dissolution and ending of the business of the partnership is the solution when any serious dispute among the partners arises.

If you are in a General Partnership, then it is necessary to have an attorney draft a new partnership agreement for you that provides good solutions to common problems and caters to your goals.  An attorney can also help you form the best type of partnership for your needs.  A partnership agreement should be custom tailored to suit the needs of the business itself, the individual owners, and the current law in Ohio.  The attorneys at Harris & Engler are experienced and skillful drafters of partnership agreements for Ohio businesses and ventures.

Types of Partnership in Ohio

There are generally four types of partnership: General Partnership (GP), Limited Partnership (LP), Limited Liability Partnership (LLP), and Limited Liability Limited Partnership (LLLP).

Limited Partnership

A Limited Partnership (LP) is a different spin on a General Partnership.  There must be general partners in a LP.  General partners can fully burden the partnership with obligations and are fully liable for partnership obligations.  The general partners can admit limited partners.  Limited partners have a very limited ability to burden the partnership with obligations.  Limited partners are not full owners of the business and could not take out loans for the business or do other significant tasks that are reserved for the general partners.  In return, limited partners have their liability for partnership obligations limited to the amount of their capital contributions to the partnership.

Limited Liability Partnership

Limited Liability Partnerships (LLPs) have, well, limited liability.  In order to create a LLP in Ohio, a Statement of Qualification must be filed with the Secretary of State.  A LLP limits liability in that partners are not liable for obligations created by the other partners.  The partnership itself, however, is liable for the acts of the partners.  This means that if one partner does something wrong and incurs liability, all the of the assets of the partnership are at risk, but not the other partners personal assets.  Even with a LLP, a partner is always personally liable for their own acts.  Thus, a third party who has been wronged by a partner can go after all the assets of the partnership and all the assets of the wrongdoing partner, but none of the assets of the innocent partners.

Limited Liability Limited Partnership

A Limited Liability Limited Partnership (LLLP) is simply a combination of a LP and LLP.  With a LLLP, the general partners have some limited liability protection and the limited partners have the same protection as they had under the LP umbrella.

Ohio Partnership Attorneys

If you are involved in a partnership dispute or have partnership agreement drafting needs, then contact an attorney at Harris & Engler.  If you have been operating business as a partnership, it is important to have an attorney prepare a custom partnership agreement to fit your needs.  If business circumstances have changed and you need advice on admitting new partners, expelling business partners, or changing business structure, contact an attorney at Harris & Engler by calling (614) 610-9988.  The law firm of Harris & Engler is located in Columbus, Ohio, and its attorneys help business owners with their business needs all across Ohio.



 


 

Columbus Business Law Firm

Disclaimer:  Harris & Engler offers this website and the content on it for informational purposes only, as a service for our clients and friends.  The contents of this site are not considered legal advice for any purpose, and you should not consider them as such advice or as legal opinion on any matters. 

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