If you are exploring the world of entrepreneurship, you might have heard the term “general partnership” quite frequently. In the simplest words, a general partnership is a type of business where two or more individuals come together to own and run a business. If you are planning to start a business with someone else in New Jersey, this article is for you. In this article, we will take you through the nitty-gritty of forming a general partnership in New Jersey step-by-step.
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What is a General Partnership?
Before we dive into the legalities of how to form a general partnership in New Jersey, let us first understand what exactly a general partnership is. A general partnership is a business type where any number of partners come together to carry on a business with a common objective to make a profit. Here, the partners co-own and co-operate the business, they share profit and loss equally, and have shared liability.
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Choose a Name
Before you start the paperwork to form a general partnership in New Jersey, you should search and finalize a business name. It is important to choose a unique and memorable name that reflects the nature of your business. You will need to include the phrase “General Partnership” or its abbreviation “GP” in the name of your business.
Register your business
The next step is to register your business with the New Jersey Division of Revenue and Enterprise Services. You can register your general partnership as a business by filing a certificate of formation. The registration will cost you a fee of $125, which can be submitted with a credit card online or by sending in a check or money order by mail.
You need to fill out a form detailing information like the name of your business, address, name and registered agent of the organization, name, address, and more. Make sure you double-check the details before submitting them, as an error could lead to complications later.
Once you have received approval from the Division, your partnership is officially registered with the State of New Jersey, allowing you to conduct business legally.
Draft a Partnership Agreement
General partnerships, unlike corporations, operate as per their bilateral agreement, making it important to have a partnership agreement in place. This legal agreement details out the formal terms of your business relationship with your partners.
Drafting a partnership agreement sets out everything that has been discussed between you and your business partners. It includes details like financial and managerial provisions, increases or decreases in partnership interest, distribution of profits and loss, transferability of interests, and much more.
Make sure a qualified attorney checks the partnership agreement before its documentation and discussing essential matters that could impact your business's future.
Get Business Licenses
After registering the business, you will need to get all the required licenses specific to your type of business and location from the concerned state agencies and offices. Generally, all businesses require a state or local business license, tax identification number, and Federal Employer Identification Number (FEIN) issued by the Internal Revenue Service(IRF).
Health and Safety Compliance
You are required to meet certain standards and guidelines to ensure the health and safety of your workforce. Depending on the nature of your business and the workforce's working conditions, your concern could mean organizing necessary insurance policies, providing medical coverage, and ensuring fire safety measures.
Partnership Taxation
A general partnership does not pay income taxes separately from individuals. All profits by the partnership are divided between partners and declared on the personal income tax return. Each partner is required to show their share of the profit interest by filing New Jersey Business Income Tax returns, and federal business Income Tax returns with their personal income tax returns Federal Form 1065.
Understanding your legal obligations and rights
Running a general partnership means legal obligations and rights as more than one entity is involved. It can include legal troubles over managing departure of interests, fiduciary responsibilities, potential liabilities, labor pay structure, and taxation reimbursements, that could ultimately cut into profits.
Therefore, to ensure efficient business operations, accountability, compliance, and safety measures should be taken seriously and maintained. Legal advice might guide you and your partners, ensuring you are both on the same track.
Conclusion
Now that we have gone through the necessary steps required to form a general partnership in New Jersey, and pertain to procedural guidance specific to your business form it is suggested to employ a well qualified & tested accountant, attorney, professional or tax consultant to guide and execute super efficient compliance, planning, and managing processes for smooth operations and overall success. It is recommended to take their suggestions regularly to help you focus on your core business responsibilities without worrying about time-consuming legal obligations.
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