As someone who heads a Pennsylvania sole proprietorship, you may enjoy being your own boss. However, the possibility of forming a business partnership seems just too good to pass up. With a partner, your business can receive added expertise, more business connections and additional financing. But can you convert your sole proprietorship into a partnership? The answer is yes, though it requires a few crucial steps for the move to proceed.
As Chron.com explains, one of the most important steps is to work out all the details with your partner before you make the new business arrangement official. For example, how much of your business do you want your new partner to actually own? Do you want an equal split, or will you own more of the business, or possibly less? Determining an ownership split will also contribute to how much of the profits you and your partner will receive. If your partner owns forty percent of the company, it is likely the partner will also get forty percent of the earnings.
Other areas a partnership arrangement should address include the following:
- The responsibilities of each partner
- How your partner will invest in the company, if applicable
- How disputes will be handled
- How one or both partners may sell their ownership in the business
All of these points should make up the partnership agreement. Once the agreement is composed and finalized, both you and your partner should retain copies of it. Also prepare copies for all relevant governmental agencies, including the state’s secretary of state office. Once the state has a copy of your agreement, your partnership will be eligible to seek business licenses from the state.
With a final agreement in place, you and your partner should begin the process of complying with Pennsylvania’s business laws for partnerships. The U.S. Small Business Administration points out that some states require you to file for new licenses once you change the structure of your business. Additionally, you should create a new bank account for your partnership. Your bank may stipulate that a change in business structure also requires a new account to house the assets.