How to convert from sole proprietorship to general partnership?

Question

I own a small pet sitting business as a sole proprietorship for over 3 years now. It has grown tremendously and one of my sitters has been with me for a year. She has been working almost full time and is a great asset.

We have a complimentary skillset and we work together well, even when we disagree. I would like to switch to a general partnership from a certain point forward. So, in other words, my clients up to, say, the end of this year would remain my clients. Any clients we add starting next year would be joint clients.

I'm aware of the additional tax forms needed and we will create a contract, but other than that, do I need to notify anyone that my business type is changing? Like the city that provides my business license?

Answer 1

Basically, you can't convert a sole proprietorship to a partnership.  They are separate legal entities.  You will have to form a partnership, file whatever documentation your state and local governments require, obtain new business licenses, open a new bank account, etc.

Have a lawyer draw up the partnership agreement.

Unless otherwise specified a partnership implies equal shares of costs and profits.  Since that is not what you are looking for be sure that the lawyer understands how costs and income are to be allocated so that the agreement will reflect what you want.

For example, you might provide a list of existing clients and and have the agreement state that all costs and income from those clients are yours and that all costs and income from all other clients are to be shared equally.

Hope this helps

Jerry-the-bookkeeper