Starting a business can be a big decision, but you don’t have to do it alone. Forming a partnership can be a great way to join forces and create a thriving business.
However, making this decision requires a lot of study and points to consider. So that you can understand once and for all whether this is the best option for you, we will show you everything you need to know about a business partnership. Check it out.
What is a business corporation?
The business model is a group of people who have a common goal, to professionally carry out an economic activity that aims to make a profit. This type of partnership is between two or more partners and must be registered with the Commercial Board of the entrepreneurs’ state, and can occur between both individuals and legal entities.
What are the types of business corporations?
Now that you understand the broad concept, let’s present the possibilities that exist in USA. Before starting a business, it is important to learn about each type of company to understand which one best meets your needs. Check out the main models below.
Simple Society
This is the most basic type of all. Formerly known as Civil Society, this model is linked only to activities related to the production and circulation of special goods and services, which can also be performed by independent professionals.
It is linked to intellectual, scientific, literary or artistic activities and its rules are dictated by the New Civil Code.
General Partnership
This is a company exclusively for individuals, where the partners will be in charge and will be unlimitedly responsible for financial and tax obligations.
However, it is possible for partners to limit some liabilities among themselves, as long as they formalize this information in an addendum signed by all or through a contractual clause. This limitation may occur in cases where the business owners find themselves unable to pay their debts, or when their private assets cannot be fully paid.
The company’s administration must also be carried out, without exception, by a partner, and an administrator who is not part of the partnership is not permitted.
Limited Partnership
Now, we will move on to other more complex types. In the simple limited partnership model, the partners are divided in two ways:
- general partners: individuals responsible for the company’s tax obligations;
- limited partners: they are only obligated for the value of their share.
This model is mixed, as it includes both entrepreneurs with limited liabilities and others with unlimited liabilities.
One of its main characteristics is that the company’s management must be led by general partners or by those defined in the articles of association. It is also important to highlight that when drafting the articles of association, it will be necessary to discriminate between the two categories, in addition to the rules of the general partnership model.
Limited Liability Company
The limited liability company, or LTDA, is the most common model used in USA. This model is formed by two or more partners, whether individuals or legal entities. Each member has their share in the company defined based on their quota, that is, their share in the organization’s share capital.
In this type of partnership, the partners’ liability is limited to the value of the share capital, therefore, if the company incurs debts greater than the value indicated in the articles of association, the members’ personal assets will not be affected.
Regarding the administration of the business, it does not need to be conducted solely by the partners, and a legal representative who is not listed in the articles of association may be chosen.
Public Limited Company
The public limited company or S/A is also well known and is related to large-scale economic activities and companies with a higher level of maturity.
In this model, capital is not associated with people but with shares. The company must be formed by at least 7 shareholders and their responsibilities are divided according to their respective shares.
In a public limited company, the share capital can be divided into:
- publicly traded: when its value can be traded on the stock exchange;
- closed capital: does not allow trading on the stock exchange.
The SA has a unique constitution and its operation is established in its bylaws and in the rules of the law. It is considered a normative or institutional company, and its shareholders do not have any contract between them.
Limited Partnership by Shares
This model, like the public limited company, has its capital divided into shares, however, it does not operate jointly with its shareholders, but rather through a company or name.
Responsibilities are borne by one or more directors, appointed for this purpose at the time of incorporation and who may be dismissed by resolution of shareholders representing at least two thirds of the company’s capital.
Cooperative Society
This model is more peculiar and less common, as it requires, among its requirements, the participation of at least 20 people, who can be individuals or legal entities, for its formation.
The cooperative allows free participation by all and is organized in a democratic manner in relation to the economy. The responsibilities of the members are limited and they are only responsible for the value of their shares and any losses.
What are the pros and cons of opening a company with partners?
Is it worth opening a partnership? The truth is that there are pros and cons to this relationship and you should think about all aspects before making the decision. You need to consider, for example, the role and participation of each person, the level of involvement, expectations and affinities and even the temperament of the individuals.
Think of a partnership as a marriage. Your partner can be a shoulder to cry on and a support system at times, but they can also pull your ear when you make bad decisions, disagree with actions you consider right, and even abandon ship when you least expect it.
To help you weigh up, check out some of the advantages and disadvantages of this business model.
Pros
One advantage of this type of partnership is that your skills, abilities, contacts, and technical knowledge complement each other. For example, if you are good at finance and your partner is good at sales, you will have a profitable partnership. However, both partners need to work with the same dedication for the company to grow.
Investments may also be higher, which will bring more growth opportunities to the business. If things are not going so well, the losses will also be shared, not falling on the shoulders of a single person.
On the other hand, financial control will need to be stricter so that results are shown accurately, which will also be positive for the financial health of the enterprise.
Cons
A complicated and common situation in partnerships is when one of the business owners dedicates more time to the business than the other, disrupting the harmony of the work and generating conflicts. Your partner may also have different ideas and plans for the future of the business than you do.
Remember that businesses always start with enthusiasm, but it is in the day-to-day running of the company that owners must talk to find solutions and the best paths for growth.
Another disadvantage is the withdrawal of partial profits, which will be doubled, generating financial uncertainty and insecurity at the beginning of the business.