Setting Up a Business Partnership in New York

In New York, you can form several types of partnerships: 1) General Partnership (GP), where all partners share in management and have unlimited personal liability; 2) Limited Partnership (LP), which has both general partners who manage the business and limited partners who are typically investors with limited liability; 3) Limited Liability Partnership (LLP), which provides liability protection to all partners for the actions of other partners; and 4) Limited Liability Limited Partnership (LLLP), which combines features of LPs and LLPs. Each structure has different formation requirements, liability protections, and tax implications.

Unlike corporations or LLCs, general partnerships in New York do not require any formal filing with the state to exist legally. A partnership is formed automatically when two or more people agree to do business together and share profits. However, you should still create a written partnership agreement, obtain necessary business licenses, register your business name by filing a Certificate of Assumed Name (DBA) with the county clerk where your business is located, and obtain an EIN from the IRS for tax purposes.

A comprehensive New York partnership agreement should include: 1) Partnership name, purpose, and principal place of business; 2) Capital contributions of each partner; 3) Profit and loss allocation percentages; 4) Partners' authority, roles, and responsibilities; 5) Decision-making processes and voting rights; 6) Partnership management structure; 7) Procedures for admitting new partners; 8) Buyout provisions and procedures for partner withdrawal or death; 9) Dispute resolution methods; 10) Partnership dissolution terms; and 11) Amendment procedures for the agreement. Having an attorney review your agreement is highly recommended.

Partnerships in New York are pass-through entities for tax purposes. This means the partnership itself doesn't pay income taxes; instead, profits and losses pass through to the individual partners who report them on their personal tax returns. Partners must pay both federal and New York state income taxes on their share of partnership income. Additionally, partners typically must pay self-employment taxes (Medicare and Social Security) on their partnership income. Partnerships must file an annual information return (Form 1065) with the IRS and IT-204 with New York State, along with providing Schedule K-1 forms to each partner.

Liability protection varies by partnership type in New York: 1) General Partnerships offer no liability protection - each partner is personally liable for all partnership debts and obligations; 2) Limited Partnerships protect limited partners from personal liability beyond their investment, but general partners maintain unlimited liability; 3) Limited Liability Partnerships (LLPs) protect all partners from personal liability for the negligence, wrongful acts, or misconduct of other partners or employees (though partners remain liable for their own actions and partnership contractual obligations); 4) Limited Liability Limited Partnerships combine LP and LLP features, potentially protecting even general partners. For maximum liability protection, consider forming an LLC instead.

To register an LLP in New York: 1) Choose a name that includes 'Registered Limited Liability Partnership,' 'Limited Liability Partnership,' 'R.L.L.P.,' 'RLLP,' 'L.L.P.,' or 'LLP'; 2) File a Certificate of Registration with the New York Department of State, including the LLP name, address, registered agent information, and a statement that you're forming an LLP; 3) Pay the filing fee (currently $200); 4) Publish a notice of formation in two newspapers (one daily, one weekly) in the county where your office is located for six consecutive weeks; 5) File an affidavit of publication with the Department of State within 120 days of formation; 6) Create an LLP agreement; and 7) Obtain necessary business licenses and permits.

Yes, you can convert an existing business to a partnership in New York, though the process varies depending on your current business structure. Converting a sole proprietorship to a partnership involves bringing on partners, creating a partnership agreement, and possibly filing a new DBA. Converting from an LLC or corporation is more complex and may require formal dissolution of the existing entity and formation of a new partnership, potentially triggering tax consequences. Some entities may use statutory conversion processes if available. Consult with a business attorney and tax professional before converting to understand all legal and tax implications.

Ongoing compliance requirements for New York partnerships include: 1) Filing annual federal and state tax returns (Form 1065 and IT-204); 2) Issuing Schedule K-1 forms to partners; 3) Maintaining accurate financial records; 4) Renewing business licenses and permits as needed; 5) For LLPs, filing a biennial statement with the Department of State and paying the associated fee; 6) Maintaining proper business insurance; 7) Complying with employment laws if you have employees; and 8) Following industry-specific regulations. Requirements vary by partnership type, with LLPs and LLLPs having more formal requirements than general partnerships.

Partner disputes in New York are ideally resolved according to the procedures outlined in your partnership agreement. If your agreement doesn't address dispute resolution or if partners can't reach a resolution, options include: 1) Negotiation between partners; 2) Mediation with a neutral third party; 3) Arbitration, which is less formal than court but produces a binding decision; or 4) Litigation in New York courts, which should generally be a last resort. New York courts will typically enforce valid partnership agreements. For serious deadlocks that threaten the business, partners may seek judicial dissolution of the partnership. Having detailed dispute resolution procedures in your partnership agreement can save significant time and money.