ContractsCounsel Logo

General Partnership

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 7,528 reviews
Home Types of Contracts General Partnership

Jump to Section

Need help with a General Partnership?

Post Project Now

General partnerships are a great way to pool your resources with someone who shares similar professional competencies. In the article below, we’ve outlined everything you need to know about general partnerships:

What is a General Partnership?

General partnerships, also known as GPs, are a type of legal entity that two or more owners create on a jointly-owned business. They establish the terms and conditions through a legal agreement. This business partnership agreement addresses ownership issues, such as profits, losses, and liabilities.

This web page also discusses general partnerships.

Pros and Cons of General Partnerships

It is critical to select the right partner to assist you in your business. Before making a final decision, understand the benefits and drawbacks of general partnerships.

Pros of General Partnerships

Here are the five pros of general partnerships:

Pro 1. Ease of Formation

A general partnership is as simple to establish as a sole proprietorship . The formation of a partnership business requires only a few filings, such as a detailed partnership agreement that outlines the responsibilities of each partner in the business.

Pro 2. Default Entity

There is no need to draft a detailed legal document before starting operations. This assertion is true as long as each partner agrees on the guidelines for their business among themselves.

Pro 3. Leadership Diversity

In a general partnership, people from various backgrounds and cultures pool their resources to form a general partnership. Diverse people’s experiences and skills can help you build a more effective and profitable business that will last in the long run.

Pro 4. Passthrough Entity Taxation

Partner report profits and losses incurred by the business on individual tax returns. This pass through entity gives them the benefit of the pass-through taxation structure.

Pro 5. Ease of Conversion

Each partner is responsible for half of the company’s liabilities. If five partners are involved, the liability percentage drops to twenty percent for each, but this does not guarantee risk-free business because personal assets are at risk.

Meet some lawyers on our platform

James H.

2 projects on CC
View Profile

Daehoon P.

159 projects on CC
View Profile

Michael M.

463 projects on CC
View Profile

Brian R.

1 project on CC
View Profile

Cons of General Partnerships

Here are the five cons of general partnerships:

Con 1. Personal Liability

Because a general partnership does not function as an independent entity, it lacks the financial protection of personal assets that a corporation or other types of business structures provide. If there is a problem with liabilities or losses, each partner may be personally liable depending on the cost, putting their assets at risk.

Con 2. Startup Funding

Each partner in a general partnership has personal tax liabilities and general debt liabilities that they cannot control directly. It makes it difficult for the company to find investors or other sources of financing to raise capital outside of the partners’ networks. As a result, a general partnership tends to be smaller compared to an LLC or corporation.

Con 3. Self-Employment Taxes

Instead of paying corporate taxes, general partners pay self-employment taxes. Self-employment tax is currently 15.3 percent.

Con 4. Transferability

A partner cannot transfer or divest their interest in their own business unless stated explicitly in the general partnership business agreement. Some states use the unanimous voting method because there are no strict regulations for a transfer of interest.

Con 5. Licenses

Many states allow partnerships to run without a license. However, a general partnership must have a business license when necessary. Examples of businesses that require licenses are restaurants and bars.

ContractsCounsel General Partnership Image

Image via Pexels by fauxels

Who Owns a General Partnership?

General partners own a general partnership. They form one by filing documents with the secretary of state’s office when requested. Otherwise, a general partnership agreement is sufficient to establish a relationship.

Here’s a web page that describes general partners.

General Partnership vs. Limited Partnership

General partnerships and limited partnerships have differences and similarities. They have in common that they both function as pass-through entities for tax purposes. As such, general and limited partners don’t have to pay taxes and report them on personal tax returns instead

Here are a few other issues to consider when looking at general partnerships vs. limited partnerships:


In the event of insolvency, general partners face unlimited liability. In other words, if the company goes bankrupt, bankruptcy courts can use the general partners’ assets to pay off debts. There’s virtually no asset protection on a general partnership.

Limited partners, on the other hand, have a lower level of liability than general partners. This outcome is since they don’t have the same authority and power as general partners.


The partnership agreement predetermines the limited partners’ ownership. If the general partner’s ownership is not mentioned or stated otherwise in the agreement, the general partner’s ownership is an equal owner of the entity.


Limited partners do not have complete control over operations or process management. Simply put, limited partners have very little power compared to general partners. General partners have complete control over the company’s operations, management, and other decision-making authority.

Profit & Loss

If profits and losses are not stated or mentioned in the agreement, general partners share them equally. Limited partners, on the other hand, share profits and losses based on their investment amounts.

General Partnership vs. LLCs

General partnerships are vastly different from LLCs. The most significant difference lies within asset protection and personal liability, not to mention taxation. An LLC can also act as a general partner in a general partnership.

Here are a few other essential considerations to make as well:


A limited liability company (LLC) is formed by filing “ Articles of Organization ” with the secretary of state’s office. The LLC specifies its name, whether the owners will run the company, the location of its principal office, and who will receive notices, lawsuits, and other official documents on behalf of the LLC.

General partnerships are formed by at least two people agreeing to be partners or conducting business and sharing profits even if there is no formal agreement. The partners do not file agreements and organizational documents. Unless it does business under the partners’ real names, the partnership must register a trade name.

Owners’ Liability

General partners are personally liable for the debts of the company. These obligations include money owed for loans and agreements, as well as injuries caused by a partner’s or its employees’ wrongful acts. Creditors can seize the partners’ homes, bank accounts, and other assets to pay their debts.

A member’s liability in an LLC is limited to his investment in the company; they do not risk losing personal assets to pay company debts.

Partners’ Authority

A single partner can act on behalf of the general partnership, putting the other partners at risk for unpaid debts, negligence, and intentional wrongdoing. A member-managed LLC, like a partnership, is run by its members.


There is no such thing as a general partnership that exists independently of its owners. The partnership ends when one of the partners dies, withdraws, or is unable to conduct business. An LLC survives the death or removal of a member because it is a separate legal entity and has operated indefinitely.

If you need a business formation or help with joint ventures, corporate lawyers and LLC lawyers can help you navigate the issues. They’ll ensure that you create the perfect structure that’s legally sound and healthy. Post a project in ContractsCounsel’s marketplace to find a legal professional in your state today.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our General Partnership Lawyers

Bruce B. on ContractsCounsel
View Bruce
5.0 (13)
Member Since:
January 11, 2022

Bruce B.

Managing Attorney
Free Consultation
Tampa, FL
8 Yrs Experience
Licensed in FL
University of South Carolina

Bruce Burk practice is in the area of small business, labor and employment, contracts, real estate and civil litigation. Bruce has litigated over 40 trials as well as many appeals. He prioritizes client communication and satisfaction as well as delivering high quality work product.

Cory B. on ContractsCounsel
View Cory
5.0 (1)
Member Since:
November 29, 2021

Cory B.

Free Consultation
Bellaire, OH
7 Yrs Experience
Licensed in OH
Duquesne University School of Law

Attorney Cory Barack specializes in business, real estate, probate, and energy law. He can help you with oil/gas leases, easements, property sales, drafting contracts and wills, setting up companies, and resolving disputes. He is licensed to practice law in Ohio and is located in Eastern Ohio.

Daehoon P. on ContractsCounsel
View Daehoon
4.7 (95)
Member Since:
November 26, 2021

Daehoon P.

Corporate Lawyer
Free Consultation
New York, NY
8 Yrs Experience
Licensed in NY
American University Washington College of Law

Advised startups and established corporations on a wide range of commercial and corporate matters, including VC funding, technology law, and M&A. Commercial and Corporate Matters • Advised companies on commercial and corporate matters and drafted corporate documents and commercial agreements—including but not limited to —Convertible Note, SAFE, Promissory Note, Terms and Conditions, SaaS Agreement, Employment Agreement, Contractor Agreement, Joint Venture Agreement, Stock Purchase Agreement, Asset Purchase Agreement, Shareholders Agreement, Partnership Agreement, Franchise Agreement, License Agreement, and Financing Agreement. • Drafted and revised internal regulations of joint venture companies (board of directors, employment, office organization, discretional duty, internal control, accounting, fund management, etc.) • Advised JVs on corporate structuring and other legal matters • Advised startups on VC funding Employment Matters • Drafted a wide range of employment agreements, including dental associate agreements, physician employment agreements, startup employment agreements, and executive employment agreements. • Advised clients on complex employment law matters and drafted employment agreements, dispute settlement agreements, and severance agreements. General Counsel • As outside general counsel, I advised startups on ICOs, securities law, business licenses, regulatory compliance, and other commercial and corporate matters. • Drafted or analyzed coin or token sale agreements for global ICOs. • Assisted clients with corporate formations, including filing incorporation documents and foreign corporation registrations, drafting operating and partnership agreements, and creating articles of incorporation and bylaws. Dispute Resolution • Conducted legal research, and document review, and drafted pleadings, motions, and other trial documents. • Advised the client on strategic approaches to discovery proceedings and settlement negotiation. • Advised clients on employment dispute settlements.

Cameron S. on ContractsCounsel
View Cameron
Member Since:
January 24, 2022

Cameron S.

Free Consultation
San Francisco
28 Yrs Experience
Licensed in CA
University of San Francisco

A commercial contracts lawyer with over 25 years of experience (both at large law firms and in-house as general counsel of a public company)

Brittany B. on ContractsCounsel
View Brittany
Member Since:
December 4, 2021

Brittany B.

Free Consultation
Ann Arbor, MI
9 Yrs Experience
Licensed in MI
Wayne State University Law School

Brittany advises startups and emerging and public companies at all stages of growth, with focuses on formation and corporate governance matters, securities, venture capital financings, M&A and other strategic transactions, commercial contracts and general corporate counseling. Brittany represents clients across a broad spectrum of industries, including technology, automotive, mobility, digital health, consumer products and manufacturing.

James A. on ContractsCounsel
View James
Member Since:
December 5, 2021

James A.

Free Consultation
Birmingham, AL
6 Yrs Experience
Licensed in AL
Birmingham School of Law

James Allen is a native of Birmingham, Alabama. Mr. Allen has a considerable amount of experience in the areas of domestic relations, criminal law, family law, and general civil litigation.

Emily Y. on ContractsCounsel
View Emily
Member Since:
December 6, 2021

Emily Y.

Free Consultation
Colorado Springs, Colorado
7 Yrs Experience
Licensed in CO
University of Colorado

I am available to advise on entity formation, contracts, and employment policies. I am also comfortable litigating business disputes including partnership disputes and employment cases. Prior to opening my current practice, I worked for several years in a small civil litigation practice focused on employment matters and civil litigation. I attended law school at the University of Colorado, and I went to the University of British Columbia for my undergraduate education.

Find the best lawyer for your project

Browse Lawyers Now
Business lawyers by top cities
See All Business Lawyers
General Partnership lawyers by city
See All General Partnership Lawyers
related contracts
See More Contracts
other helpful articles

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer


Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city