What is a General Partnership? Frequently Asked Questions
Starting a business is a major undertaking and requires careful planning and expert legal advice3 min read
Starting a business is a major undertaking and requires careful planning and expert legal advice. For many entrepreneurs, choosing how to structure the business entity is one of the most important steps in the process. A partnership is an option for many small businesses, and a general partnership is the most straightforward form of joining two or more individuals in a business venture. If you’re considering forming a general partnership in Chicago, you are undoubtedly wondering about the legalities involved. Here, we answer some of the most frequently asked questions regarding general partnership definition and local regulations in Chicago.
What is a General Partnership?
A general partnership is an association of two or more parties, typically individuals or another business, who join together to conduct a business enterprise. A partnership and its partners are separately and jointly liable and responsible for any legal obligations, debts, or damages incurred by the business. Each partner in the partnership contributes money, property, or services in return for a share of the enterprise’s profits and losses.
What are the Legal Requirements for Forming a Partnership?
In Illinois, the legal requirements for forming a general partnership are relatively broad. The first and most important requirement is that each of the partners must not be a legal entity, such as a corporation or limited liability company (LLC). The partners must also have a signed agreement which sets forth details of how the business will be conducted, such as how business profits will be handled, and how authority of the business is divided between the individual partners. The other key legal requirement when forming a general partnership is filing a document known as a “Certificate of Limited Partnership” with the Illinois Secretary of State.
What Legal Liability do Partners Have?
When it comes to general partnerships, it is important to be aware that partners are jointly and separately liable for any legal obligations, debts, or damages incurred by the partnerships. Liability is equal among the partners and the individual partner’s assets are subject to seizure in the event that the legal liability of the partnership cannot be satisfied.
Are All Partners Responsible for Management Decisions?
In a general partnership, all partners have equal say in the management and operation of the venture. As such, all partners are equally responsible for any decisions concerning the business venture, regardless of the actual contribution of any individual partner. Being an equal partner in a business venture can be beneficial, however, it is important to recognise the risks involved.
How can an Attorney Help?
Enlisting the services of a qualified business attorney provides added security when going into business with a partner or partners. A business attorney can provide the necessary legal advice to help you navigate the process of forming and maintaining a legal business entity. Furthermore, they are able to assist with owner disputes, vendor contracts, tax issues, and more.
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