Can you have a partner that's not listed on your LLC?

5 Replies

I have a partner with not great credit. Mine is very good. He doesn't want his credit to affect my buying power and we want to set up an LLC. Is it possible for him to be a partner and NOT be on the LLC?

Sure, you can sign a contract (a partnership agreement) that lays out roles, responsibilities, etc with regard to the relationship between you and your partner.

That said, when you purchase an asset, if you purchase it with the company (or the company acquires it), then the partner who doesn't hold any ownership in the company assumes some risk.

Hi J, Thank you.

So legally he is not on the LLC, but could you explain a bit more about how this other contract works?

A partnership agreement being two or more individuals just lays out a framework for how they will work together, what they will do, how much they will contribute, how they'll split profits, how they'll settle disputes, etc.

It can be as simple as a one-page contract or as complicated as you want to make it to ensure everyone's interests are represented adequately.

smitnlit,

As j. Scott said, it's as simple as a partnership agreement. I would however, in your situation, give respect to the fact that you have more to lose than your future partner... insure yourself. There are some pretty angled insurance policies that cover partnership agreements, errors and ommissions, fidelity etc... Should your partnership "run amuck", you want to be sure that your personal life/credit is not detrimentally affected, and if it is, you are able to recoup the financial costs of recovery. That said, insurance is not a business plan. Strong fundamentals, management, and a stellar concept should have you and your partner on your way. I wish you the best of luck!

Dustin

smitnlit,

As j. Scott said, it's as simple as a partnership agreement. I would however, in your situation, give respect to the fact that you have more to lose than your future partner... insure yourself. There are some pretty angled insurance policies that cover partnership agreements, errors and ommissions, fidelity etc... Should your partnership "run amuck", you want to be sure that your personal life/credit is not detrimentally affected, and if it is, you are able to recoup the financial costs of recovery. That said, insurance is not a business plan. Strong fundamentals, management, and a stellar concept should have you and your partner on your way. I wish you the best of luck!

Dustin

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