Where partners live is unimportant with regard to forming a partnership. While practical considerations will generally result in the business being headquartered where at least one of the partners lives, the partners are not legally required to locate their business in one state or another based on personal legal residence. Moreover, since a sole proprietorship has no formal filing requirements, you will not need to dissolve your business prior to starting the partnership. General partnerships are informal business organizations that require minimal formal governmental filings to form.
Choose which state you want to headquarter the partnership. You need to choose a permanent headquarters so that jurisdiction can be established in case of a lawsuit between the partners. Select the state where you plan to conduct the majority of your business. The "majority of your business" is wherever your partnership makes the majority of its sales or primarily provides its services.
Read More: How to Change Ownership From a Proprietorship to a Partnership
Choose the name under which the partnership will operate. A partnership’s legal name is a list of the last names of the partners. If you wish to use another name, such as “A&E Consulting,” in most states you must register that name as a “doing business as.” Reasons to operate using a DBA include marketing and privacy considerations. How you register your partnership’s DBA depends on where the partnership is located, but generally you must apply to the county clerk where your partnership is headquartered or with the state government.
Research if your business will require any special licenses in the state where the business is headquartered. Most states require businesses to obtain a basic business license. Businesses that participate in specific industries may be required to obtain additional licenses. Contact your local chamber of commerce, county clerk or secretary of state to determine what licenses you require and the process for obtaining those licenses.
Apply to the IRS for an employer identification number, or EIN. The easiest method for obtaining an EIN is by applying online through the IRS. The website will issue an EIN immediately. You can also apply by calling (800) 829-4333, and receive your partnership’s EIN over the phone.
While not required to form a partnership, a well-drafted partnership agreement will help mitigate problems in the long run. The partnership should describe the financial and managerial responsibilities of each partner, as well as the activities the partnership can undertake. It should also address possible situations, such as how to admit a new partner and what happens when one partner wishes to leave. After you have negotiated and completed drafting the agreement, have all partners sign the document.
- Entrepreneur: Sole Proprietorship
- National Agricultural Law Center: General Partnerships
- Citizen Media Law Project: Forming a Partnership
- Small Business Administration: Register Your Fictitious or “Doing Business As” (DBA) Name
- Citizen Media Law Project: Partnership Agreements
- Internal Revenue Service: How to Apply for an EIN