General Partnership

The legal form of doing business as a general partnership comes into existence when there is an association of two or more persons, the general partners, who carry on a business for profit as co-owners. The existence of a profit motive is essential. No filing or other registration with the Secretary of State is required.

Control
Each general partner has a right to participate in partnership management, as well as a right to share in the profits of the partnership. The issue of control can be addressed with a partnership agreement. This written agreement is not legally required, but it encourages specificity. An interest in a general partnership cannot be transferred without the consent of the other general partners (unless the transferred interest is only a right to profits). Death or withdrawal of any general partner dissolves the general partnership.

Liability
Each general partner has joint and several unlimited personal liability for obligations of the general partnership. This means that each general partner has the potential of being personally indebted for each obligation of the general partnership. One general partner's actions can make another general partner personally liable on a contract. Similarly, the actions or torts of one general partner arising in the ordinary course of the general partnership's business can result in another general partner being personally liable on a contract or in a lawsuit. Further, a general partner owes the utmost duty to the general partnership and to each of the other general partners. In order to limit the liability of a general partner, such entities often elect to be treated as a LLP by filing a certificate with the Secretary of State.

Taxation
Partnerships are "pass-through" entities for tax purposes; the general partnership itself does not pay taxes. Each general partner takes into account his or her share of general partnership income, losses, deductions and credits in determining his or her personal tax liability. A partnership agreement may provide for the allocation of these tax benefits and burdens.

Administration
General partnerships do not require any formal organizational meeting or state filing requirement to come into existence. The only obligations required are those germane to all business entities such as a business license, tradename registration, proper permits and the like, unless a decision is made to elect LLP status.