Partnerships and Limited Partnerships
In Illinois, if two or more people go into business together without forming a separate legal entity (such as a corporation or a limited liability corporation – LLC, for short), they are presumed to have formed a partnership. A general partnership is a default business structure, and it may or may not be what best suits your best interests. General partnerships are easy to establish, and offer great flexibility. However, general partnerships offer no asset or liability protection whatsoever for the partners. As such, if the business’ assets are not enough to cover the business’ debts, the creditors may pursue the partners’ personal assets. In contrast, other business structures, such as corporations , limited liability companies (LLC’s), or limited liability partnerships (LLP’s), shield their owners’ personal assets from the reach of business creditors.
Limited partnerships can provide some shield from liability, while maintaining the lack of formality and the flexibility that are the hallmarks of most partnerships. They can be useful where one partner simply wants to be an investor with no management authority or responsibility (i.e. a silent partner).
Almost nobody goes into business with a pessimistic attitude about what the future holds. But what happens if a business partner dies, files bankruptcy, gets divorced, or simply doesn’t perform as anticipated? In the absence of clear and complete agreements between co-owners, Illinois laws impose some basic, default provisions about how a business’ profits and losses must be allocated, etc. However, effective written business agreements can go a long way toward keeping owners in charge of their own business.
Business partners can write their own rules specifying how your partnership operates, how its assets and liabilities are to be distributed, as well as what should happen in case one or all of the partners decide to leave the partnership in a written partnership agreement. Failing to do so can open the door to expensive litigation, where an Illinois court may decide that two or more people have formed a partnership, even if they did not intend to do so. In such cases, the Illinois Uniform Partnership Act provides certain “default” terms for the partnership: for example, in the absence of an agreement that includes different arrangements, the partners would be held to have equal power in the management of the business, and to be equally liable for any business debts.
If you are considering in creating a partnership in DuPage County, Illinois, or would like to modify an existing partnership agreement, you should seek the advice of an experienced attorney who can protect your business and financial interests. At Kollias P.C., we have several decades of legal and practical experience advising clients on business incorporation matters, and preparing thorough, well-drafted partnership agreements. We can help you prepare the documents necessary for your business to run the way you want it to. The DuPage County attorneys at Kollias P.C. work tirelessly to meet the client’s needs and achieve their goals.
We offer a free 30-minute initial consultation: to schedule one today, please call (630) 407-1200, or complete our online intake form.