Before engaging in a business venture, it is important to understand exactly how the business will be constituted and registered. For businesses located in the state of Illinois, the process can be a bit more complex. Due to Chicago's location within the state, certain laws and regulations governing the fulfillment of regulatory requirements can vary. Of the myriad of options available, many have chosen the general partnership. To better assist those interested in a general partnership, here are some FAQs about the legal and operational implications of a general partnership in Chicago.

What Is a General Partnership?

A general partnership, generally speaking, is a formalized and registered business arrangement between two or more individuals wherein those individuals share in the liabilities and profits of the business. Furthermore, the tax implications of the business will be passed onto the individual partners, as well as the general business structure itself. Depending on the structure, each of the partners can have differing levels of responsibility and authority over the various functions of the partnership.

Is a Formal Agreement Required?

It is highly recommended that all partners engaging in a general partnership enter into a formal agreement detailing the contractual obligations of each of the parties. This agreement should outline the individual contributions of each of the partners, the authority and oversight of the individual partners, the terms of the business arrangement, profit sharing, and the dissolution of the partnership. Not only will such an agreement provide legal and financial protections to each of the partners, it will help ensure that the business itself is in compliance with applicable conditions set forth by the city of Chicago.

What Legal Obligations Apply for a Partner?

Due to the fact that a partner can be held liable for the actions of the partnership itself, it is important to understand the various regulatory and statutory requirements of the partnership. Depending on the type of business operating in the general partnership, the partner may be required to abide by certain rules and regulations. Furthermore, if the partnership offers goods or services, all sales taxes must be properly filed and paid. In regards to the individual partners, they will be required to adhere to all applicable filings required by the State of Illinois and the city of Chicago.

Are There Any Fiduciary Obligations?

Whenever two or more parties enter into a formalized agreement, there will be certain fiduciary duties that must be met. These responsibilities may not always be explicitly outlined in the partnership agreement; however, they do exist and must be complied with in order to protect all involved parties. Such obligations include but are not limited to: honesty, loyalty, and the use of sound judgment when the partnership makes decisions. It is important for the partners to understand the implications of breaching any of the aforementioned fiduciary duties as the breach can result in both civil financial liability and, in some cases, criminal penalties.

What are the Liability Implications of a General Partnership?

As a general rule of thumb, a partner in a general partnership has joint and several liability. This means that any of the partners in the arrangement can be held liable for the legal obligations of the partnership regardless of his or her involvement in the dispute. Additionally, if the liabilities of the partnership exceed the amount of capital in the arrangement, the individual partners can be held personally liable for the engagement of the debt. As a result, it is important for partners in a general partnership to be aware of the risk they are taking.

`Topics: Chicago, General Partnership, Legal Obligations.`