A business created before or after marriage is often a contentious issue which ends in litigation when filing for divorce.
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California Business Partnership
A California business partnership is formed when two or more individuals agree to form a business entity and do not file documents with the Secretary of State of California to create a corporation, a limited liability company, or a limited liability partnership. Although, you are not required to file or register with the state, like any business entity, you are still required to meet the same local registration required of any new business, to obtain an employer identification number if they employ others, and to record any fictitious name used by the partnership to conduct business.
Joint Authority
In any California business partnership, the power to manage the California business partnership is held with those partners who have personal liability and any partner who has this power can contract and bind the entire business partnership.
Taxes
A California business partnership is not a separate tax entity from its owners. The IRS refers to a business partnership as a “pass-through entity.” This means that the partnership itself does not pay tax on any income or benefit from any loss but rather that these items “passes through” to the individual partners who then report the figure on their individual tax return. Additionally, each partner must make quarterly estimated tax payments to the IRS each year and the partnership must file IRS Form 1065.
General Business Partnership
A structure in which every partner has the power to manage the California business partnership, make business decisions, and where every partner is personally liable for all business debts, business obligations, and any court judgment. This means that, like the sole proprietor, if the business partnership cannot pay it’s debts, a creditor (vendor, supplier, lender or landlord) can sue the business partnership, obtain a judgment, and attach the property of any partner – their house, car, or other personal property – to satisfy the debt.
Limited Business Partnership
This is a California business partnership in which only the general partner manages the business partnership, make business decision, and are personally liable for the debts of the business partnership. All other partners are limited partners which means that “usually” their liability is limited to their contributed amounts – their personal assets cannot be attached to satisfy the debts or obligations of the business partnership. I say “usually” because, should a limited partner assume the duties of a general partner, either by managing the business partnership or by making decisions for the business partnership, then they too will be considered general partners. Limited partners must remain passive investors to maintain their limited liability status.
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For more information on community property, click on one of the following links:
Divorce – Sacramento Attorney – Lawyer Consultation
California Divorce Guide- Sacramento Attorney – Lawyer Consultation
