Â A general partnership is an association of two or more people who carry on a business for profit purposes.Â Each partner is liable for the debt and responsibilities of the company, and unlike a corporation, you have no legal protection for your personal assets.
As in a sole proprietorship, when you form a partnership with someone else, the existence of it may depend on a living person.Â So if one partner dies, the business may dissolve.Â
Â The Uniform Partnership Act (UPA) has set guidelines for general partnerships, which include:
* Joint tenancy
* Sharing of gross returns
* Sharing of profits from a business
You don’t have to formally declare that someone is a par t of a partnership. They can be declared part of the partnership by estoppel, which means it cannot be denied.
Each partner has to report and pay taxes based on the income they received.Â There are no set guidelines for how the profits must be split between the partnership.
You should know that every partner is responsible for the other partner’s actions.Â So if your partner has one too many drinks at lunch and crashes into someone in a company vehicle, the victim can sue the company – which means all of your personal assets are in danger.
In a partnership, every party has equal voting rights, regardless of how much they contributed to the business.Â There is no “squeezing out” of one partner.
As with a sole proprietorship, all you need to do to form a general partnership is file a DBA with your local authorities.