In the state of Arkansas, when two or more individuals or entities enter into a business relationship for profit, they are considered a general partnership. Unlike a corporation or LLC, a general partnership is not a separate legal entity from the partners themselves. As such, the partners are personally liable for any debts or obligations of the partnership. This article will outline the steps required to create a general partnership in Arkansas.
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1. Choose Your Partners
The first step in creating a partnership is to choose your partners. Partners can be individuals, corporations, or other partnerships, and they must be 18 years of age or older. It is important to choose partners who share your values and goals for the business, and who have complementary skills and expertise.
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2. Create a Partnership Agreement
The next step is to create a partnership agreement. This is a legal document that outlines the terms and conditions of the partnership, including:
- The name of the partnership
- The purpose of the partnership
- The contributions of each partner (money, property, services, etc.)
- The percentage of profits and losses that each partner is entitled to
- The management and decision-making structure of the partnership
- The duration of the partnership and procedures for ending it
- The procedures for admitting new partners and resolving disputes
A partnership agreement should be drafted by an attorney to ensure that it is legally compliant and meets the needs of all partners.
3. Register Your Partnership
In Arkansas, partnerships are not required to register with the state, but if the partnership has a name other than the names of the partners, it must be registered as a fictitious name or "Doing Business As" (DBA) with the Secretary of State's office. To register a DBA, a partnership must complete and file a Registration of Fictitious Name form, along with a $25 filing fee.
4. Obtain Permits and Licenses
Depending on the nature of your business, you may need to obtain permits or licenses from state or local agencies. For example, if you are starting a restaurant, you will need to obtain a food service permit from the Arkansas Department of Health. It is important to research the requirements for your specific business and obtain all necessary permits and licenses.
5. Obtain a Tax Identification Number
Every partnership must obtain a tax identification number (TIN) from the Internal Revenue Service (IRS). This number is used to identify the partnership for tax purposes. Partnerships are not required to pay federal income taxes; instead, they file an annual informational return (Form 1065) which shows the income earned and expenses incurred by the partnership. Each partner then receives a Schedule K-1 which shows their share of the partnership's profits and losses, which they report on their individual tax returns.
Conclusion
Creating a general partnership in Arkansas requires careful planning and attention to legal requirements. By choosing the right partners, creating a solid partnership agreement, and taking the necessary steps to register, obtain permits, and obtain a TIN, you can set your partnership up for success. It is recommended that you consult with an attorney or other legal professional to ensure that your partnership is created in compliance with all applicable laws and regulations.
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