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Dunn Lambert, LLC | Attorneys At Law

Comprehensive Legal Services For Businesses

In New Jersey And New York call
201-957-0874

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Business Law Professionals

How do I know if a business co-owner is a partner?

On Behalf of | Aug 5, 2022 | Business & Commercial Law |

You probably do not own your business alone. One or more individuals may share ownership with you. If this is the case, you should know whether a fellow co-owner is also a business partner.

A misunderstanding of roles in a business can lead to conflict between owners and possibly the dissolution of the company. This may happen if a co-owner claims responsibilities appropriate for a partner without a basis for doing so. As Chron points out, there are differences between a co-owner and a full-fledged partner.

The contributions of a co-owner

A co-owner is anyone who owns a share of a business. However, buying a share such as stock does not mean that the person can dictate managerial decisions. It depends on what the bylaws or articles of the company say about who controls the business. Some people buy stocks but contribute nothing to the business beyond their investment. These stockholders tend to have no responsibilities when it comes to running the company.

The contributions of a partner

A business partner plays a far more active role in the enterprise. The company may employ the partner to do active work for the business. The partner also has powers to control business decisions. These can include hiring and firing employees, choosing which projects to work on, and who to make deals with.

However, a partner also has greater liability exposure. A co-owner generally only risks the money he or she put into the company. However, a partner could lose both business and personal assets if the business becomes the target of litigation.

Founding documents can be essential

A co-owner who has invested in a business but has no share in liability and has performed no labor for the company is likely not a partner. Possible confusion over co-owners and business partners is why business partnerships should have clearly written founding documents. A well established leadership structure may prevent a messy breakup of a business.