A partnership is a common form of business entity chosen by Illinois business owners. Unlike a sole proprietorship, which is a company with only one owner, a partnership requires at least two owners. If you are considering forming a partnership, it is important to know what a partnership is, what laws govern Illinois partnerships, and what different types of partnerships are available.
What is a Partnership?A partnership is a legal form of business entity in which two or more people agree to share responsibility for the management and profits of the company. A partnership can be formed various ways. A partnership can be formed intentionally by formally drawing up documents that outline the responsibilities and obligations of each partner along with rules concerning the handling of profits and losses. A partnership can also be formed informally by “the association of 2 or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.” 805 ILCS 206/202. A person who receives a share of the business’s profits is presumed to be a partner unless that person was paid wages as an employee or compensated as an independent contractor.
Illinois laws that govern partnershipsIn Illinois, partnerships are governed by the Illinois Uniform Partnership Act of 1997 (“Partnership Act”). The Partnership Act provides a default set of rules that govern partnerships. Many business partners often choose to formalize their relationship by creating partnership agreements. Additionally, Illinois courts consider a partnership to be a contractual relationship and as such, common law contract law applies and controls the terms of the partnership and obligations of the partners.
Different types of partnershipsPartnerships come in a number of different forms but three of the most popular types of partnerships are: (1) the general partnership (GP), (2) the limited partnership (LP), and (3) the limited liability partnership (LLP).
A general partnership is a partnership where all partners manage the business and assume responsibility for the partnership’s debts and daily obligations. A general partnership is easy to create and requires minimal ongoing maintenance. Unlike corporations, a general partnership is not required to pay a formation filing fee, ongoing annual state fees, hold an annual meeting, issue shares, or separate personal assets from business assets. Further, no state filing is required to form a general partnership. The general partnership is created when the partners start business activities. Even though the formation of a general partnership requires no state filing, the partners must still comply with registration, filing, and tax requirements applicable to any business.
A limited partnership is a partnership where certain partners manage the day-to-day operations of the business while others serve only as “silent” investors. The partners who actively manage the business are called general partners, and they assume all the liability for the partnership, similar to partners in a general partnership. The silent investors are called limited partners, and they do not have any control over the management of the business but also do not assume personal liability for the debts of the partnership.
A limited liability partnership is a partnership with both general and limited partners, similar to a limited partnership, but offers each of the limited liability partners protection from the liabilities incurred by the other partners. LLPs are typically limited to certain types of professional service businesses, including accountants, architects, doctors, attorneys, dentists, and other lawful professionals. The personal assets of partners in an LLP are generally shielded from creditors seeking to satisfy the debts and liabilities of the partnership.
Whether you are considering forming a partnership or are a partner having a partnership dispute with the other partners, it is advisable to seek the assistance of an experienced partnership attorney.
The DuPage County partnership dispute attorneys at Lubin Austermuehle have more than three decades of experience handling partnership disputes both in and out of court. Our Chicago partnership dispute lawyers are experienced litigators who have handled complex partnership and business lawsuits in many different industries or business areas including disputes between partners in law firms, doctors in medical practices, real-estate development partners, accounting firms, franchises and a host of other areas.
Our Chicago partner dispute attorneys have years of experience defending and prosecuting claims involving partners including breach of fiduciary duty and fraud claims and claims involving the freeze-out of partners in the federal and state courts in Illinois as well as emergency partnership litigation such as obtaining TROs and preliminary injunctions. We are knowledgeable regarding the changes and complexities of partnership law. We are committed to fighting for our clients' rights in partnership dispute cases at both the trial and appellate court levels. We have successfully defended or prosecuted partnership dispute cases achieving large settlements for our clients or winning them control of their businesses. Conveniently located in Chicago and Elmhurst, Illinois, we have successfully litigated business separation, accounting and breach of fiduciary duty cases for clients all over the Chicago area. To schedule a consultation with one of our skilled attorneys, you can contact us online or give us a call on our toll-free number at 630-333-0333.