Don't Start Your Business with Partners Before You Read This — New York Business Law

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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  • Ramy Matalon

    The advise given here is very valuable and merits serious consideration however it concentrates on dealing with all the legal and technical safeguards but lacks the very basic essential prerequisites  A partnership is like a marriage with the divorce rate being even higher. All too often we marry the wrong girl and set up a partnership with the wrong guy  because we are “in love” . At least in business we should qualify our being ” in love ” with our partner with the following questions : do we trust our partner, can we work with him 24/7 , is he long term  asset, will he stay an asset through thick and thin and finally , if things go bad will the divorce be amicable and respectful.
    Only after we weigh all these questions seriously should we proceed the wedding ceremony be it in Las Vegas or The Vatican.

  • Ramy:

    The information that you have provided is 100% correct. Thanks for your comment.

  • Fernanda Bulcão

    It is a great advice.Still, only after some time and the situations we have to manage, we can check if the partnership is worthy.

  • Fernanda Bulcão

    It is a great advice.Still, only after some time and the situations we have to manage, we can check if the partnership is worthy.

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