The Washington Revised Uniform Partnership Act

Updated: Sep 11

What are the consequences of doing business as a partnership in Vancouver, Washington?

What is considered a partnership in Vancouver, Washington?

A partnership in Washington State is formed when two or more people start to carry on a business together, as co-owners, for profit. There's three elements within that definition. The first is obvious: you can't have a partnership without at least two people. The second is that they must do business as co-owners. They must behave the way co-owners would behave towards one another. That means that if you contributed money to a business, but never got the keys to the building, don't have access to business financial records, and don't participate in the major decision-making, you're not a partner and won't be entitled under the law to receive the share of profits given to partners. The third element is that it must be a profit-driven business to fall under the WA Revised Uniform Partnership Act. Non-profits are formed under a different Washington statute.

How do you form a partnership in WA?

See above. Just start doing business with (1) two or more people, (2) who carry on as co-owners, (3) for a profit. No formal paperwork needs to be filed with the WA Secretary of State, unlike and LLC or a corporation.

"No formal paperwork...."

Is a partnership right for me?

Partnerships are great because there's no paperwork, and the WA Revised Uniform Partnership Act has default rules to provide legal rights to partners, even where there is no written, formal partnership agreement. For example, without an agreement to the contrary, the WA Revised Uniform Partnership Act requires partners to receive equal distribution of profits. In other words, if there are two partners, WA guarantees a 50-50 split of the profits. But that also means partners share liabilities evenly, including tax liabilities.

Partnerships are part of the reason the LLC was created. Partners are personally liable for the debts of the partnership, so they don't have the liability shield that a corporation offers. But corporations are taxed like separate entities, which means profits could suffer a corporate tax, and then the owner's income gets taxed a second time. Partners pay taxes only once, on their personal tax returns, but their personal assets are at risk in the event of a lawsuit. An LLC fixes the problem, because an LLC is treated like a partnership for tax purposes, but a corporation for liability purposes. It also gives the option of selecting S corporation status with the IRS, which we discuss in this article.

If you have more questions about the Revised Uniform Partnership Act in Vancouver, Washington, please contact In-house | On-site to speak with a Vancouver WA attorney.

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