Setting Up a Business Partnership in Delaware

Decide which type of partnership structure best suits your business needs in Delaware: General Partnership (GP), Limited Partnership (LP), or Limited Liability Partnership (LLP). Each has different liability protections and management structures. GPs offer no liability protection, LPs protect limited partners but not general partners, and LLPs offer liability protection to all partners. Consider consulting with a business attorney to determine the best structure based on your business goals, risk tolerance, and tax considerations.

Conduct a business name search through the Delaware Division of Corporations to ensure your desired partnership name is available. If available, you may reserve the name for 120 days by filing a name reservation application and paying the required fee. Make sure your name complies with Delaware naming requirements and doesn't infringe on existing trademarks.

Create a comprehensive partnership agreement that outlines the rights, responsibilities, and obligations of all partners. Include provisions for profit and loss distribution, management authority, dispute resolution, partner admission/withdrawal procedures, dissolution terms, and capital contributions. While not legally required in Delaware, a written partnership agreement is strongly recommended to prevent future disputes and establish clear operating procedures.

Create a document detailing each partner's initial and ongoing capital contributions to the partnership. Specify the amount, form (cash, property, services), valuation method for non-cash contributions, timing of contributions, and how capital accounts will be maintained. Include provisions for additional capital calls if needed and consequences for failure to make required contributions.

For Limited Partnerships (LPs) and Limited Liability Partnerships (LLPs), file a Certificate of Partnership with the Delaware Division of Corporations. General Partnerships (GPs) are not required to file formation documents in Delaware but may choose to file a Statement of Partnership Existence. The certificate must include the partnership name, registered agent information, principal office address, and partner information as required by Delaware law.

Designate a registered agent with a physical address in Delaware who will receive legal documents and official correspondence on behalf of your partnership. This is required for LPs and LLPs. The registered agent must be available during normal business hours. You can use a registered agent service or, if you have a physical presence in Delaware, designate an individual or business entity.

Apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This is required for partnerships to file taxes, open business bank accounts, and hire employees. You can apply online through the IRS website, by mail, fax, or phone. There is no filing fee, and online applications receive an EIN immediately.

Register with the Delaware Division of Revenue for applicable state taxes. While Delaware does not have a sales tax, you may need to register for other taxes depending on your business activities, such as gross receipts tax, employer withholding tax, or other industry-specific taxes. Check with local jurisdictions for any additional tax registration requirements.

Obtain necessary business licenses and permits. All businesses operating in Delaware must have a Delaware Business License from the Division of Revenue. Additional licenses or permits may be required depending on your industry, location, and business activities. Research requirements at state, county, and municipal levels.

If operating under a name different from the legal partnership name, file a Fictitious Business Name Statement (also called a DBA or 'Doing Business As') with the county clerk's office where your business is located. Publication requirements may apply depending on the county. This allows you to legally operate under your chosen trade name.

Open a separate business bank account for your partnership using your EIN and formation documents. Keep business and personal finances strictly separate to maintain liability protection and simplify accounting. Prepare a Business Bank Account Resolution authorizing specific partners to conduct banking activities on behalf of the partnership.

Secure appropriate business insurance for your partnership. Consider general liability, professional liability, property, workers' compensation (if you have employees), and business interruption insurance. For partnerships with limited liability protection, insurance provides an additional layer of protection against claims.

Develop detailed operating procedures that govern day-to-day operations of the partnership. Include protocols for decision-making, meeting schedules, record-keeping requirements, financial management practices, partner responsibilities, employee management, and compliance procedures. These procedures should align with your partnership agreement but provide more specific operational guidance.

Create a buy-sell agreement that establishes procedures for handling partner departures, deaths, disabilities, or other triggering events. Include valuation methods for partnership interests, payment terms, funding mechanisms (such as life insurance), and transfer restrictions. This agreement helps ensure business continuity and provides a clear exit strategy for partners.

While Delaware does not have a state sales tax, if your partnership conducts business in other states, you may need to register for sales tax permits in those jurisdictions. Research multi-state sales tax obligations based on your business activities, especially if selling products or certain services across state lines.

Create a compliance calendar to track ongoing filing requirements and deadlines. For Delaware partnerships, this includes annual report filings (for LPs and LLPs), tax filing deadlines, license renewals, and any industry-specific compliance requirements. Set up reminders at least 30 days before each deadline to ensure timely compliance.

Establish a comprehensive record-keeping system for partnership documents, financial records, meeting minutes, and compliance filings. Delaware law requires partnerships to maintain certain records, including the partnership agreement, financial statements, tax returns, and partner information. Proper record-keeping is essential for legal compliance, tax purposes, and potential partner disputes.