What is a general partnership?

Asked on 1/22/2009 by Rose Nylund - The Rusty Anchor
Answered by ABC Staff

A General Partnership or simply a partnership, is formed when two or more persons agree to carry on a business together. This agreement can be written or oral. A general partnership is formed when two or more people intend to work together to carry on a business activity. No local or state filings are required to create this type of partnership. A general partner may or may not invest, participates in running the partnership and is liable for all acts and debts of the partnership and any member of it. A General Partnership does not have limited partners.

Advantages:

• Partnerships typically have less costs, paperwork and state registrations involved in both formation and upkeep. However, without written documentation, the partnership becomes subject to significant defaults state laws.
• You have a shared financial commitment.
• You can pool resources, expertise, and strengths.
• There are limited startup costs.
• There are few formalities (mostly applicable licenses).

Disadvantages:

• Each partner is liable for the acts of the others and financial losses of the partnership, and there is no protection of personal property as there is with a corporation. 
• Any partner without the other may bind the partnership. 
• Money and property contributed to the partnership becomes owned by the partnership unless otherwise stated and the contributor is not entitled to its return unless stated in the partnership agreement.
• Partnerships vary in legal requirements and liabilities by state, do not have the easy of transfer and investment that a corporation structure provides and therefore are regarded as less preferable to other business forms for investment.
• Partners may have different visions or goals for the business.
• There may be unequal commitment in terms of time and finances.
• There may also be personal disputes.
• Partners are personally liable for business debts and liabilities.
• Each partner may also be liable for debts incurred, decisions made, and actions taken by the other partner or partners.
• At some time, there most certainly will be disagreements in management plans, operational procedures, and future vision for the business.
• You may encounter difficulty in attracting investors.

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