Business Entities at the State Level: General Partnerships
Today’s blog will deal with partnerships. This week we will be focusing on general partnerships, but next week is going to discuss limited partnerships. We will discuss what a general partnership is, how it works, and who would benefit most from filing their business as a general partnership.
A general partnership is a business arrangement between two or more individuals where the parties agree to share all assets, profits, and liabilities of a jointly-owned business structure. The individuals are referred to as “general partners” and each party is subject to unlimited liability, meaning that personal assets may be liable to the partnership’s obligations.
A general partnership is often not filed with the state, but similarly to a trade name, the name of the partnership is filed as an Assumed Business Name with the local County Clerk and sometimes the Secretary of State’s office in addition to any required licensing. General partnerships are governed by a partnership agreement that is approved by all of the parties; oral agreements are often found to be invalid. The general partnership is similar to the sole proprietorship in that the business does not pay an income tax; profits and losses are most often passed onto the partners in proportion of their percentage of the company.
The largest benefits of a general partnership are the lower filing fees and limited need for paperwork. However, the unlimited liability is a very large drawback. If you have any other questions about whether filing a general partnership is right for you, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions. Please contact us at (618) 997-3436.