Legal Question in Business Law in Michigan

Re: What do I need to do to form a partnership in my business.

A limited liability company (L.L.C.) is somewhat of a blend of the best features of a corporation and a partnership. The owners are called members and, as in a corporation or partnership, they may own equal or unequal percentages of the business.

An LLC and a corporation are formed in a similar manner. An LLC is formed by filing Articles or Organization with the state (in this case, Michigan) and paying the required fee (usually $50). A corporation is formed by filing Articles of Incorporation with the state and paying the required fee. The forms for each are provided by the State on its website or by calling the office in Lansing.

In both an LLC and a corporation, the relative interests of the owners must be spelled out in a written agreement. For an LLC, the document is an Operating Agreement. The Operating Agreement should state the names of the members, their relative ownership interests, how the profits of the business will be divided between the members, and other provisions concerning rules that will apply to ownership and operation of the company.

In a corporation, a Shareholder Agreement would include the same provisions as should be in the Operating Agreement for an LLC (see previous paragraph).

In an LLC, the operating agreement serves as the record of the interests of each member. If the members agree to allow another member into the company, the operating agreement is amended to reflect the new member and to show the adjustment of each member's respective interest in the company. In a corporation, it usually is desireable to issue shares of stock to reflect the interests of each shareholder, although this is not mandatory.

Regardless of the form chosen, it is adviseable to consult with an attorney, who will make recommendations based on the nature of the business, the status and contributions of the owners, and other relevant information.

This response is not intended as legal advice. Your rights and obligations will depend upon the particular facts and circumstances affecting this matter. You should consult an attorney in your area to discuss all of the relevant facts and circumstances. No attorney/client relationship is created as a result of this response. I may be contacted at 248.788.8225.