General Partnership

A general partnership is formed when two or more individuals create a for-profit, unincorporated business and are all part owners of it. No written partnership agreement is required, although it can be done that way. A general partnership can be created even if you did not intend it.

A partnership is in some ways like a dual or multi-person sole proprietorship. Some features of this business entity include:

• Personal liability of the owners: each partner is liable for all partnership debts and obligations in full, and the actions of one partner are binding on each of the other partners.
• Taxation: No tax at the entity level. Each partner pays tax on his/her share of income and can deduct losses against other sources of income.
• Business formation: No state filings required; Local filings if partnership holds real estate.
• Membership rules: two or more individuals.
• Management: each partner has an equal voice, unless otherwise arranged.

The advantages of partnership are:

• Easy to start.
• No double taxation.
• Little regulation and paperwork required.
• It may be easier to raise debt financing in a partnership than a sole proprietorship.

The disadvantages of a partnership include:

• Unlimited liability for the partners.
• Partnership may lead to personal trouble between the partners.
• The actions of one partner are binding on each of the other partners.