Gregory Gilman, CEO of RxVantage (www.rxvantage.com), discusses what a general partnership is. This information will help out small business owners when thinking of starting a general partnership.
- No setup registration requirements
- A basic agreement is required from all parties involved
- Benefit of pass-through taxation
- Unlimited liability for the company is shared by all partners
- De facto business type for two or more owners
I get asked very frequently -- what is a general partnership, and this is the de facto entity for two or more people operating a business or owning a business together.
It does not have any setup requirements. So you do not have to file anything with the state or the federal government. If you are owning and operating a business with one or more other people, you are a general partnership.
You have to actually have a partnership agreement but that can be as simple as an oral agreement deciding how the business is going to be run.
There is pass-through taxation for general partnerships.
But there is also unfortunately jointly shared unlimited liability for the debts and liabilities of the partnership.
So while it is appropriate for many people, many entrepreneurs are going to want to give serious consideration to creating a different type of entity in order to limit their personal liability.