General Partnerhships

A general partnership is a non-filing entity, which means that it can be formed by the association of two or more persons who come together for the purpose of sharing profits, as well as losses, in a particular business as co-owners.  Because partnerships do not have to file formal documents with the state, partnerships can be formed on accident or by mistake.  Under the laws of agency, there is no need to have a written partnership agreement.  However a written partnership agreement would solve many potential problems that could arise in a partnership.  A good reason to file formal partnership paperwork with the state is to put third parties on notice that they have to deal with the partnership and not an individual.  But such a filing is not required.

For example: If Jane and John wanted to start a business together, and had wanted to create an LLC, but never file the proper paperwork, their business defaults into a partnership.  This partnership can also be created through the act of Jane and John buying a piece of property together.
In terms of control over the partnership, neither partner has control over the other partner, as an employer would direct an employee.  There is sharing of control and a consensus, or majority, should be reached in order to make decisions for the partnership.  At the same time, each partner is an agent for the other, and for the partnership.  Each can bind the partnership in contract, and each is liable for the torts of the other; there is joint and several liability.
Partnerships are governed by Revised Uniform Partnership Act, RUPA, but these rules can be changed through negotiation and freedom of contract within the partnership agreement.

 

Photo By: Victor1558