Business Structure: General Partnership

  Introduction

A general partnership is an association of two or more persons who go into business together. By default, it is formed when you start operating your business together. Although it is relatively easy to form as there are no filing requirements, a general partnership offers no liability protection and owners are therefore personally liable for all of the business debts and liabilities. Like a sole proprietorship, even with the low start-up costs and ease of operation, the lack of liability protection can make general partnerships one of the most expensive types of structures in the long run.

  Advantages

• No paperwork is required for formation although a partnership agreement is usually recommended
• No extra tax filing requirement, as profits or losses can be reported on the owner’s tax return (pass through taxation)
• Flexibility in management control and profit sharing

  Disadvantages

• General partners are personally liable for all of the business debts and liabilities
• As a general matter, when one general partner leaves, the partnership automatically dissolves
• General partners typically cannot transfer partnership interests