When organizing and planning a business in Florida, you have the option of many entities, each of which have their advantages and disadvantages. General partnership is one of those type of entities the owners of a business can form to conduct their business operation.
What is general partnership?
A business venture entered as partnership involves two or more individuals named partners. Partnerships can come in two forms: the general partnership and limited partnership; but there are many other subcategories of partnerships (e.g., limited liability limited partnership).
A general partnership may consist of two or more individuals whom may have the right to run the business, while they would also be responsible for the debts and financial obligations of the business.
Limited partnership formed by a combination of general and limited partners. While the investment may come from the limited partners; the limited partners would not be involved or responsible for the actual operation of the business since their involvement is purely monetary. Likewise, their liability to the partnership is limited.
Advantages of a general partnership
- Tax benefits
A partnership may not be taxed at the entity level but the profits and losses for tax purposes may pass to the owners (the partners).
Setting up a general partnership business can be very cost-effective as it does not require a lot of paperwork unlike in a corporation.
Disadvantages of a general partnership
- Personal liability to the business
A general partner can be held personally liability to the business operation and the business’s debts.
- Conflicts may arise among members
If no proper distinctions are made among the partners (if even possible) and their decisional
power, the conflicts and potential deadlocks may arise in running the operations of the partnership.
How to start a general partnership?
Below is an easy-to- follow process that lawyers in Florida may suggest to all soon-to- be entrepreneurs planning to set-up a partnership (consult with your Florida business lawyer to determine if a partnership is proper for you).
- Draft a partnership agreement that is satisfactory and executed by all the partners
- Follow the procedures and pay the necessary fees to register your partnership with the Division of Corporations of the Florida Department of State
- Follow the procedures and pay the necessary fees to register the name of your partnership if you decide to use another name, known also as “doing business as” or DBA.
- Register your business with the Internal Revenue Service (IRS) for federal taxes. Your EIN is also a requirement if you will open a separate bank account for your business’ earnings.
- Obtain any licenses required to conduct your specific type of business in Florida.
- Obtain any applicable city and/or county business licenses and local business tax receipt as it may be required where you conduct business.
- If you have intentions of hiring permanent or part-time employees for your partnership, additional requirements may need to be followed under Federal and Florida regulations.
The above is a very simple guide relating to general and limited partnerships. A partnership may or may not be suitable for your business and its operations. A Florida business lawyer could be a perfect partner before committing yourself, your time, money and energy in any type of business.
Nico Apfelbaum, Esq. is the managing attorney of Apfelbaum Law, a Florida law firm serving Port St. Lucie, Stuart, the Treasure Coast and assisting clients with matters throughout Florida. If you are planning on opening a business in Florida, Apfelbaum Law has Florida business lawyers who can advise you through the process of selecting a legal entity and assist you through the various processes to get the business running with a proper legal and liability-protected foundation.