Here is an outline of the steps you need to follow in order to form a partnership in California. You should also read the general section on forming a partnership for information applicable in any state.
1. Choose a business name for your partnership and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.
2. Register the business name with local, state, and/or federal authorities.
- If you will be operating your partnership under a name that is different from your name and that of your partners, then you will need to file a Fictitious Business Name Statement in the county in which your primary place of business is located.
- Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.
3. Draft and sign a partnership agreement.
- Although not legally required, it is strongly suggested that you and your partners sign a partnership agreement laying out the rights and responsibilities of the partners. For details, please see the Partnership Agreements section.
4. Obtain any required local licenses.
- Please see the general section on forming a partnership for details.
5. Determine what tax and other regulatory obligations your partnership has, and take care of any necessary registrations.
- Request an Employer Identification Number (EIN) from the IRS. This can be done via its online application. There is no filing fee.
- If you will be paying at least $100 to an employee or employees (who are not partners) in a quarter, you are subject to employment taxes and must register for a California employer account number within 15 days of paying that $100. You can register for employment taxes and get an account number online using the Employment Development Department's website. You must pay these taxes quarterly. For more information on being an employer, including tax information, see the California Employer's Guide.
- Whenever you hire an employee in California, you must inform both the IRS and the State of California. The IRS details all of the necessary steps, including verifying work eligibility and withholding allowances certificates, on its page entitled Hiring Employees. You can find information for the state level in the California Employer's Guide and on the website for California's New Hire Reporting Program.
- If you have any employees in California, you must carry workers' compensation insurance. The Division of Workers' Compensation administers this program.
- There may be other informational returns that you will have to file annually or semi-annually with either the IRS or the State. For more information, check out the IRS Guide To Information Returns and California Franchise Tax Board's Information Returns page.
6. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. You probably will need a Tax ID number (EIN) and either a copy of the partnership agreement or the business name filing indicating the partners' names. (Here is one example of the documentation banks ask for.)