A general partnership is a business structure where two or more individuals share ownership, profits, and liability for the company. Unlike corporations or LLCs, a general partnership does not require formal registration with the state, making it a simple and cost-effective option for business owners. However, if you plan to operate under a name different from your own or your partners’ names, you will need to register a “Doing Business As” (DBA) name with the state. This also allows you to open a company checking account in the business’s name, which can help streamline financial management.
Key Features of a General Partnership
In a general partnership, all partners have equal authority to manage the business, including signing contracts without needing approval from the other partners. This structure is similar to a sole proprietorship, except that there are multiple business owners instead of just one. Each partner is considered self-employed and must file taxes accordingly, reporting their share of the business’s profits and losses on their personal tax returns.
Advantages and Disadvantages of a General Partnership
- Advantages:
- Easy and inexpensive to set up, with no need for formal registration.
- All partners have equal rights and responsibilities in managing the business.
- Profits are passed through directly to the partners, avoiding double taxation.
- Disadvantages:
- Partners share personal liability for business debts and obligations, which could put personal assets at risk.
- Disagreements between partners can lead to conflict if there is no clear partnership agreement.
When to Consider a General Partnership
A general partnership might be the right choice if you are starting a small business with a trusted partner and want to avoid the costs and formalities of incorporating. However, it’s important to have a detailed partnership agreement in place to outline responsibilities, profit sharing, and conflict resolution.
Consult an Estate Planning Attorney for Your Business Needs
If you’re considering structuring your business as a general partnership or need advice on how it fits into your overall estate plan, our experienced attorneys are here to help. Visit Hudack Law Estate Planning Attorney to learn more about our services. We’re proud to serve California, Utah, and Arizona. Call our Toll-Free line at (877) 314-4309 to schedule a consultation with one of our experienced attorneys.
