Legally Binding Partnerships

This page is thoughts/resources associated with starting legally binding partnerships, in particular, those associated with collective, collaboratives, co-ops and other social enterprises.

The intention is to avoid the costly start up costs associated with starting a "corporation". There are benefits to corporate structures, which you should understand. And that is your responsibility to learn.

I'm just passing on my knowledge from having started my own company, in case it helps you get started faster/better/cheaper. Others can add their stories/experiences/wiscome.

Terra's story:

My accountant and her husband lawyer, who are social activists, told me that incorporating wasn't worth the cost and that the risks that would be alleviated by incorporating weren't high enough with the business that I was starting that I would be covered by my liability insurance. Granted, what I do is not associated with heavy machinery, or huge risks. But nonetheless, that's her advice. And I followed it. And I've been find. I've been in business since 1994, and have hired probably over 100 contractors of various types. Granted, I have not been involved in a co-op, except as a worker, who collected checks. Then I was "governed" by the partnership docs of the co-op, who paid me as an affiliate member or some kind of employee. I can't remember. My point is that I have some experience, but don't know everything.

The second part of my story revolves around my clients, who generally have plenty of money to get themselves wrapped around long legal documents to try and alleviate any possible risk. I, on the other hand, for my own business, have opted to keep agreements small, short and constructed by myself. I have, more recently, now that I can afford to pay a lawyer an hour here or there, had my lawyer review documents to assess the validity of them, and to assess what risks I'm engaging in. But overall, my experience is that we spend way too much time trying to minimize risk, and way too little time building socially responsible businesses. At some point, you are never totally risk free. And at some point, you must trust people. All you can do is try to sidestep potential risks by taking steps to protect yourself.

The third part involves my experience starting the Sheba Green Cleaning Co-Op. With the help of Brian Price, who donated his time, we came to understand the long list of corporate structures available to us, and discussed the benefits of using one of these, as opposed to using what we have come to know as the "general business partnership". The partnership takes a name, registers the name with the town/city hall, and then files an "informational tax return". No taxes are paid with this tax return. But the members must file income taxes declaring revenues that they receive as "sole proprieters". Note that if the sole proprieter (each member) is filing as a business, they can use a "Schedule C" tax form to deduct a variety of expenses, like "business use of their home", and which allows them to deduct all kinds of things that you use for your work, office supplies, etc etc.

My point is that you may be able to start up a company really fast and avoid using a lot of lawers/consultants. You can also do the corporate filings yourself. It's up to you. I'm just telling this story so you can see what I've done.

A general business partnership is whatever the parties decide it is. If you and I start a business and agree that all expenses and profits are split equally, then that is the agreement. It could be as simple as that. For more information on the documents that Sheba Green Cleaning is using, please see the Sheba pages.

Also, if you have some money and want to have guidance from a lawyer, I recommend Brian Price at Harvard, who specializes in Social Enterprises and non-profits. He appears to be really affordable.