Don’t Start Your Business with Partners Before You Read This

by Fred Abramson on July 12, 2011 · 4 comments

You made the first step and decided to start a new business. You have two business associates who are interested in taking the plunge.  If you plan on setting up shop in New York, read on.

Starting a new business with partners could be risky.  Before you do anything, you are going to need either a Membership agreement (applicable to LLC’s), a Shareholder agreement (for S or Corporations) or a Partnership Agreement drafted. This Agreement cover the duties and obligations of each partner. This document is vital.

To ease your pain, I have created a questionnaire that will help you focus on how you will be conducting business with one another.  Since this questionnaire is part of series, make sure to check back in the coming days for more valuable information.

  • What is the name of your company? Legally, your company must have a name. Beyond searching through Google, you should check the New York Corporation and Business Entity Database  and the United States Patent and Trademark (USPTO) database. Be aware a search on the USPTO is not a substitute for a complete trademark search.
  • Social Security numbers. When you apply for a tax identification number with the IRS, you need to provide the social security number of one of the managing owners.
  • Address of the proposed company.  New York State requires that the business have an address. The registered address could be different than the actual business address. You should also obtain the addresses of all of your partners.
  • What type of business are you in?  If you or your partners own different businesses, you may not want to compete with them.
  • List all the professionals the business has hired. For example, it is really important to list the name of your accountant so that your lawyer can obtain tax records.
  • Contracts.  Has the business entered into any contracts? In the alternative, does the company expect to enter into any business relationships?
  • Permits. Some businesses, such as restaurants, may need permits to operate.
  • Intellectual Property. Does the company own any trademarks or copyrights? Does a trademark search need to be completed for the names of any products?
  • Insurance. There are many types of insurance that a company can obtain. If you plan on hiring employees, you are going to need to purchase workers compensation insurance.
  • Bank Account Information.
Coming next on my series of questions to ask before entering into a partnership: Management, Capitalization and Distributions.
The Law Office of Frederic R. Abramson represents start-up businesses in New York. If you have a question regarding New York Business Partnerships in New York, feel free to contact me at 212-233-0666.
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