Partnerships share many similarities with sole proprietorships—the key difference is that the business has two or more owners. There are three kinds of partnerships: general Partnerships (GPs), Limited Partnerships (LPs), and Limited Liability Partnerships (LLP). In a general partnership, all partners actively manage the business and share in the profits and losses. Like a sole proprietorship, a general partnership is the default mode of ownership for multiple-owner businesses—there’s no need to register a general partnership with the state.
Pros of General Partnership
- Easy to start (no need to register your business with the state).
- No corporate formalities or paperwork requirements, such as meeting minutes, bylaws, etc.
- You don’t need to absorb all the business losses on your own because the partners divide the profits and losses.
- Owners can deduct most business losses on their personal tax returns.
Cons of General Partnership
- Each owner is personally liable for the business’s debts and other liabilities.
- In some states, each partner may be personally liable for another partner’s negligent actions or behavior (this is called joint and several liability).
- Disputes among partners can unravel the business (though drafting a solid partnership agreement can help you avoid this).
- It’s more difficult to get a business loan, land a big client, and build business credit without a registered business entity.
Registering a General Partnership
When a general partnership’s owners do not want to include the last names of all of the partners in the business name, they can use a fictitious name (trade name), which will require the business to file a DBA. The DBA must be filed with the state or the county clerk—depending on the business’s location.
For example, if Janice Smith and James Jones want to market their new business by the name “Texas Taco Shack,” they would need to file a DBA for the name with the state or county clerk office. Many states also require that businesses have their fictitious name published in one or more approved newspapers or other publications in the county where it was filed.
Fictitious names may need to be renewed, so it’s important to verify the county and state requirements.
Keep in mind that registering a DBA does not provide any legal protection of the company name. Its purpose is to disclose to the public the individual, people, or entity operating the company under the assumed name. This helps protect potential customers, vendors, and others from doing business with unscrupulous owners attempting to hide their real identity. If a general partnership wants to obtain exclusive rights to use its DBA, it must register it as a trademark through the USPTO (U.S. Patent and Trademark Office).
CorpNet Can Help!
With CorpNet you can create a general partnership by filing a DBA online or you can call our office at +1-888-449-2638 to receive personalized assistance. We’re open and ready to help get your new business up and running!