Why a General Partnership?
A general partnership is formed when two (or more) people come together and create a business. No paperwork is required to form a general partnership, but there are many considerations to remember.
Advantages:
A general partnership is remarkably easy to create and maintain. Also, a general partnership does have "pass-through" taxation for the owners, which means that the income taxes are taken on the owners personal income tax returns.
Drawbacks:
Unfortunately, a general partnership doesn't provide any protection from business liabilities. In fact, partners are liable for the obligations made by other partners in the business.
Additional Considerations:
Although it is not necessary for the creation of the entity, formal documentation (outlining partner agreements, responsibilities, and profit-sharing) is strongly recommended. To create more structure and clarity with a general partnership, we would recommend that you create a DBA (doing business as) name; obtain any business licenses necessary; get permits from your county, city, state; and a Federal Tax ID number so that you can open a business account. If you intend to hire employees, you'll also need an EIN (or Identification Number) from the federal government.
If you are desiring liability protection, or to reap more tax benefits from your entity, you should consider creating an LLC, S Corp, Limited Partnership, Limited Liability Partnership, or a C Corp for your business.
We would be glad to guide you through the process of finding the right entity. Simply fill out the form below: