A general partnership is an unincorporated business owned by two or more persons or entities. A general partnership may be created when two or more owners agree to carry on a business together for profit.
In many cases, a general partnership may exist even without filing formal formation documents with the state. The partnership may be created by agreement, conduct, or the business relationship between the parties. However, written partnership agreements are strongly recommended to define the rights, responsibilities, ownership interests, profit and loss allocations, management authority, and exit procedures of the partners.
A general partnership is different from a limited partnership, limited liability partnership, corporation, or LLC. In a general partnership, each partner generally has authority to act on behalf of the partnership and may be personally responsible for the debts, obligations, and liabilities of the business.
Liability Considerations
One of the most important features of a general partnership is personal liability. In many cases, each general partner may be personally liable for the debts and obligations of the partnership. A partner may also be responsible for certain actions taken by another partner in the ordinary course of the partnership’s business.
Because a general partnership generally does not provide limited liability protection, business owners often consider whether another structure, such as an LLC, corporation, limited partnership, or limited liability partnership, may be more appropriate.
Name Registration / DBA
A general partnership may operate under the legal names of its partners. However, if the partnership conducts business under a name that is different from the legal names of the partners, it may need to register an assumed name, trade name, fictitious business name, or “DBA,” depending on the jurisdiction.
For example, if John Smith and Mary Jones operate as Smith and Jones, a separate DBA filing may or may not be required depending on the jurisdiction. However, if they operate as Capital Region Consulting Group, they may need to register that business name with the appropriate state, county, city, or local office.
DBA terminology and filing requirements vary by state and locality. Depending on the jurisdiction, the filing may be called:
- Assumed Name;
- Trade Name;
- Fictitious Business Name;
- Doing Business As;
- Business Certificate;
- Partnership Certificate; or
- Certificate of Conducting Business Under an Assumed Name.
A DBA does not create a separate legal entity and does not provide limited liability protection. It simply allows the partnership to conduct business under a name other than the legal names of the partners.
Common Characteristics of a General Partnership
A general partnership generally has the following characteristics:
- Owned by two or more partners;
- May be formed by agreement or conduct, depending on applicable law;
- Generally does not require state formation documents, although registrations may still be required;
- Partners usually share management rights unless otherwise agreed;
- Partners generally share profits and losses according to their agreement;
- Partners may be personally responsible for partnership debts and liabilities;
- Partners may have authority to bind the partnership in the ordinary course of business;
- Partnership income and losses generally pass through to the partners for tax purposes;
- A written partnership agreement is strongly recommended; and
- DBA, trade name, assumed name, license, tax, or local registrations may be required.
Partnership Agreement
Although a general partnership may be created without a written agreement, a partnership agreement is an important governance document. It can help avoid disputes by clearly addressing how the business will be operated.
A partnership agreement may address:
- Ownership percentages;
- Capital contributions;
- Profit and loss allocations;
- Management authority;
- Voting rights;
- Banking authority;
- Admission of new partners;
- Partner withdrawals;
- Buyout rights;
- Dissolution procedures;
- Dispute resolution; and
- Other operational terms.
Formation and Compliance Considerations
A general partnership is usually not formed by filing articles or a certificate of formation in the same way as a corporation or LLC. However, the partnership may still need to complete certain filings before or during business operations.
These may include:
- DBA, assumed name, trade name, or fictitious name registration;
- Local partnership or business certificate filings;
- Business license or permit applications;
- Sales tax registration;
- Employer tax registrations, if hiring employees;
- Professional or occupational licenses, if applicable;
- EIN application; and
- State or local tax registrations.
Requirements vary by jurisdiction and business activity. Partners should confirm applicable state and local filing requirements before conducting business.
