You may be a Partnership without knowing it!
The scenario is all too common. You and one or more of your friends "go into business together." You start spending money on the business, take in some first profits, and share everything equally. Since you are all friends, there are no lawyers and no paperwork to hold you back. For reasons discussed in an earlier post, this is risky business.
But what kind of business entity are you, if you choose to proceed like this? A partnership.
What does that mean practically speaking (under New York law)?
- You are personally liable for all liabilities of the partnership, i.e. you can loose your personal assets to creditors of the partnership.
- Your friends (business partners) can bind the partnership without your knowledge, i.e. they can purchase things in the name of the partnership or enter into any kind of agreement in the name of the partnership.
- You are personally liable for ALL of the partnership's debts, i.e. creditors can collect the entire debt of the partnership from you alone.
New York's partnership law can be found here; or (likely more up to date) at the New York State legislature.
If you need help on the topic of "You may be a Partnership without knowing it", contact a small business attorney in your area.
