Starting a business is hard enough without a bunch of paperwork covered in legal jargon getting in the way. Still, it's important to learn about these legal documents; you may find them quite useful if you understand their basic ideas. They can help you to delineate who in a small business will actually be benefiting from gains and suffering losses. Additionally, you may discover that, like the statement of authority, an official version is often not required. Stop fretting about these legal documents and take a minute to learn the basics about them instead.
A general partnership, also simply known as a partnership, is a type of business organization in which two or more partners are co-owners of a business. The partners will be taxed for the business income as individuals, and share in the profits and liabilities of the business. General partnerships can be formed with a verbal agreement between the partners. The benefits of general partnerships are that the individuals, rather than the business, pay income tax, and that they require less paperwork than a corporation. The disadvantages are that the individuals must take on the liability of the business, and that disagreements can easily arise between the partners about investments, paybacks and other big business decisions.
Statement of Authority
A statement of authority, commonly called a statement of partnership authority, is usually an optional, written declaration of who, as a partner in the partnership, assumes responsibility and ownership over the business. It states who has the authority to sign documents, execute plans and make decisions that may also impact the other business partners. Some businesses choose to create a statement of authority for legal purposes. A written statement of authority, even if never filed, is recommended for those starting a partnership. A statement of authority creates clear boundaries about who is responsible for the business. In some states, a statement of authority is required to be filed only by out-of-state businesses.
A statement of authority can include many different pieces of information. These usually include the name of the business, its address, the names of the partners involved, any limitations or other differences in a particular partner's authority and a signature certifying that the statement of authority is going into effect. Often, the statement requires two of the partners of the business to certify the form with their signature and the date.
Filing a Statement of Authority
Statements of authority are filed with the secretary of state in the state where the business is operating. Usually statements of authority can be found online at a particular state's secretary of state website where they can be printed out. An applicant can then fill it in and mail it for official filing. Fees for filing are usually $70 and up. While most states do not require general partnerships to file one of these statements, it's best to call the state department as you are starting your business to be sure of the requirements in your particular case.
- Coollawyer: Partnership Business Info
- AllBusiness: The Pros and Cons of a General Partnership
- State of California Secretary of State: Statement of Partnership Authority Form
- State of Kansas Office of the Secretary of State: FAQs - Business Services
- State of Tennessee Department of State: General Partnership (Statement of Partnership Authority)
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