A general partnership is one of the oldest forms of business organization. Forming a partnership is relatively easy. Unlike corporations and limited liability companies, there are no formal filing requirements to start a partnership; however, it is usually advisable for the partners to put in place a well written partnership agreement.
Another difference between a general partnership and a corporation is that the partners, as the owners of a partnership, are personally liable for all the obligations and debts of the partnership. Other forms of business organizations that offer liability protection for owners are limited liability companies and limited liability partnerships.
A third characteristic of a partnership, one that is shared by S-corporations and most limited liability companies, is that they are not subject to income tax. Instead, the partners are taxed on the partnership’s income, whether it is distributed to the partners or retained within the partnership.
In recent years, many partnerships have converted to one of the forms of business structure that offers the owners some protection against personal liability for the debts and obligations of the organization. Nonetheless, a partnership remains a viable choice for many businesses.
The Business Law Department of Smith Rayl Law Office, LLC can help you decide if a partnership is the best structure for your business and, if so, help you with its organization, including drafting a written partnership agreement.