If you are carrying on a business with at least one other person in Florida, you may be wondering whether you need to create a business organization and complete filings with the state, such as through creating a partnership or corporation. You may be surprised to know that, if you are working with another person in an ongoing business, you are already considered a general partnership under the laws of Florida, even if you have never filed a document with the state or even have drawn up a partnership agreement.
Being in a general partnership comes with significant implications for both partners, especially where the parties have not created a written partnership agreement which lays out their obligations and rights. For example, one partner could be liable for the debts of the other partner, even if the first partner was not aware of contracts entered into, and one partner could lay claim to half the profits of the partnership even if he or she did nothing to contribute to earning them.
Thus, it is important to consider what type of partnership you would like to have under Florida law, and specifically whether you would like to form a General Partnership or Limited Partnership (note: you may also have the option of forming a Limited Liability Partnership).
Formation of the Partnership
Again, a general partnership can be formed in Florida (and indeed is formed, whether intended or not) whenever two people have an ongoing business together, and shared profits are a strong sign that a general partnership exists. A limited partnership, on the other hand, requires formalities, including filing a certificate with the Florida Secretary of State.
Control of the Partnership
In a general partnership, all partners have an equal right to control the business. This includes making decisions on behalf of the business as well having access to possess and use partnership assets. This is the default rule, but can be changed and particularized through the drafting of a partnership agreement.
In a limited partnership, however, only the general partners will have the right to make decisions on behalf of the partnership and use partnership property as they see fit. Limited partners in the limited partnership do not have this right, meaning they cannot act on behalf of the partnership, i.e. enter into contracts on behalf of the partnership.
Liability for the Partnership’s Actions
In a general partnership, all partners will be personally liable for the actions of the partnership, above and beyond whatever property they contributed to the partnership. Thus, if one partner commits a tortious act on behalf of the partnership, all partners will be personally liable.
In a limited partnership, a general partner is still personally liable for the partnership’s actions – including actions taken by other general partners – but limited partners will not be personally liable for the partnership’s actions.
Disassociation From the Partnership
In a general partnership, the partners have the ability to disassociate from the partnership (leave the partnership) when they give express notice of their ability to do so.
In a limited partnership, however, a limited partner does not have the express right to disassociate from the partnership before the end of the partnership except in limited circumstances. General partners in a limited partnership do have the ability to disassociate from the partnership as they please with proper notice.
Contact Florida Business and Corporate Attorney Ryan Mynard Today
If you have any questions about partnerships in Florida, or you are seeking counsel in any other Florida business matter, contact Florida business attorney Ryan Mynard at 850-683-3940 today to get started.