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Ask Law Educator, Esq. Your Own Question
Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 114077
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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I have a question about partnership agreement. My question

Customer Question

Hi,I have a question about partnership agreement. My question is me and my partner started a business few years ago on my partners name. The past few years i was also working in the business as a manager and getting paid salary. Now we are trying to add my name into this business as a partner. All these years my partner was involved with all the accounting stuff etc and i was involved only in sales. so now when he adds my name as partner today in this business can we make sure that i be added as a partner without liability for the past few years?
Submitted: 1 year ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

What type of business entity is this? Is it an LLC, an S-corp or a C-corp? Or is it truly an unincorporated partnership?

Customer: replied 1 year ago.

Hi,until the before year it was a c-corp. last year it is changed to S-corp.

Thanks!

Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

So you are not a "partnership" which is an unincorporated entity. So, as this is a corporation, you would need a shareholder agreement in writing and essentially you are now buying into the company. So you have a purchase agreement which states you are buying your 50% share of the assets of the company and the S-corp holds you harmless and indemnifies you for any liabilities from actions of the S corp prior to the date of your purchase into the company. Between that and the corporate structure itself which protects owners from personal liability for the company, you would be protected.

Customer: replied 1 year ago.

Hi Thank you for your response. I made a investment when we started off but we do not have a legal agreement for that. so now i think we might want to show that investment and say i was a partner from that day on, but not in legal writing. so my question is, since i am not involved in the other aspect of the business can we make the partnership agreement in a way that i am not liable from that day but a partner in the business? or do you suggest another way of doing it?

Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

You would not want to say you were a partner from day one as you would then not be able to escape liability (which is very limited due to the corporate veil protections of owners anyhow) if that is what you want. You would need to state that it was consideration given to be combined with your work efforts for the company to allow you to now buy into the company as a member and in the purchase agreement, it would state that you will be indemnified and held harmless for any actions of the company which may incur personal limited liability that occurred prior to your date on the purchase agreement.

Customer: replied 1 year ago.

Thank you for your response. so you mean i should be added as a partner from now but you are saying i should be added as a partner as a compensation for my effort the past few years and not because of the investment on day one?

Expert:  Law Educator, Esq. replied 1 year ago.

Thank you for your reply.

You would be added as a partner for BOTH, your contribution of funds and work, if you want to avoid responsibility as limited as it may be for the company from the inception. As I said, your liability for the company is limited and protected by the corporate veil for everything but back taxes or government debt, so if you want to put the worry about that liability aside, then the agreement can just be for your contribution that you are made a partner of whatever percentage of the company the two of you agree upon.