General Partnership
A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested. In most jurisdictions, a partnership is a contract between individuals who, in a spirit of cooperation, agree to carry on an enterprise, contribute to it, by combining property, knowledge or activities and to share its profit. Partners may have a partnership agreement, or declaration of partnership and in some jurisdictions such agreements may be registered and available for public inspection. In many countries, a partnership is also considered to be a legal entity, although different legal systems reach different conclusions on this point.
General Partnership Structure
A general partnership is a business owned by two or more individuals or entites who share in the profits and losses, as well as the assets of the business. Essentially, a partner can act as an agent for the partnership and bind the other partners to contractual or other legal obligations. Thus, the partners are jointly and severally liable for the obligations of the partnership, and like a sole proprietorship, the partners' personal assets are subject to creditors. Partnerships do not pay taxes on business profits, but any gains or losses are reported on the partners personal income tax returns. Like sole proprietorships, partnerships may be required to apply for business licenses and file ficitious business names, but usually are not required to register with the state like a corporation.
General Partnerships vs. Limited Partnerships
The most basic form of partnership is a general partnership, in which all partners manage the business and are personally liable for its debts. Two other forms which have developed in most jurisdictions are the limited partnership (LP), in which certain "limited partners" relinquish their ability to manage the business in exchange for limited liability for the partnership's debts, and the limited liability partnership (LLP), in which all partners have some degree of limited liability.
Advantages of Partnerships
Partnerships are often favored over corporations for taxation purposes, as a partnership structure eliminates the dividend tax levied upon profits realized by the owners of a corporation. For this reason, partnerships are also a viable entity for a joint venture between corporations.
California Governance
In California, provisions governing general partnerships are found in California Corporations Code Section 16100 et seq. The California Corporations Code requirements (codifying the Uniform Partnership Act of 1994 and amended in 1996) apply to general partnerships formed on or after January 1, 1997. General Partnerships formed before January 1, 1997 may elect to be governed by the Uniform Partnership Act of 1994, as amended in 1996 (The Act). On and after January 1, 1999, all partnerships will be governed by the Uniform Partnership Act of 1994, as amended. A major objective of the act is to centralize the filing of public information related to general partnerships. All general partnership statements filed with the Secretary of State's Office pursuant to the Act are permissive and not mandatory, at this time.
How We Serve Our Clients
With our experience working with entrepeneurs to establish new businesses we will guide you through the process of forming a new company, assisting you in choosing the appropriate legal structure and explaining the advantages of each for your particular enterprise. After the business is established, our attorneys will be at your disposal to answer general legal questions when they arise. Our clients also call on us to assist them during transitional periods, raising capital, locating venture partners, merging, selling, and closing a business.
