A general partnership is an association of two or more co-owners to conduct business for profit. The general partnership is considered a business entity distinct from the partners. A change in the partnership membership does not necessarily terminate the partnership. A general partnership has some of the attributes of a separate legal entity:
- It can hold and transfer title to real property; it can continue to exist after the departure of one or more of the partners (remaining partners may be obligated to buyout departing partner);
- It is a form of co-ownership by several partners (two or more). The co-owners (partners) collectively own the business assets and they are personally liable for all of the business debts.
- Each partner is an agent of the business and each partner in turn can obligate the general partnership in its ordinary course of business.
- Partners owe one another a fiduciary duty of care.
- Partners have shared rights to participate in the management and control of the business.
- The duration of the general partnership is limited. The partnership can be dissolved at the will of the partners.
It is highly recommended that the partners to a general partnership create a partnership agreement. Ordinarily, the partnership agreement allocates profits and losses. This allocation of profits and losses can be proportional to the number of partners or it can be disproportional to the number of partners.
Unlimited Personal Liability
Be warned, in a general partnership, each general partner (or co-owner) puts his / her entire personal resources at risk for the debts and obligations of the partnership. Each partner is liable for both the debts of the partnership incurred by one of the partners and each partner is jointly and severally liable for the wrongdoings of the partner(s) that were incurred within the course of the partnership business. While the partners may reach an agreement between themselves as to the allocation of this liability, this agreement has no effect as to third parties.
A written partnership agreement is not required to create a partnership. However, it is highly advised that the co-owners to any partnership create and execute a partnership agreement prior to going into business with one another.
The information and materials on this Web site are provided for general informational purposes only and are not intended to be legal advice. We attempt to provide quality information, but the law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance. An attorney and client relationship should not be implied. Nothing on this Web site is intended to substitute for the advice of an attorney, therefore if you require legal advice please consult with a competent attorney licensed to practice in your jurisdiction.