New Jersey business law gives owners the ability to choose between different forms of entities to meet their particular concerns. The choice is important and has long lasting effects. Below is an overview of the basic types of business entities allowed by New Jersey business law.
A general partnership is an entity where two or more people own a single business and have not formed any other form of business entity. The partners own the business and are personally responsible for the business’s debts and obligations, so if the business goes out of business they partners must still pay the business’s debts. A partnership may be “de facto,” where the partners are acting together but have taken no steps to formalize their relationship; or it may be “de jure,” where they have formalized their relationship and how the business will be run. There is no income tax at the entity level in a general partnership, meaning there is more revenue to be distributed as profit to the owners. While a de facto partnership will exist without a partnership agreement, it is important to have a well written partnership agreement to ensure the smooth operation of the business and to avoid disputes between the owners.