GENERAL PARTNERSHIP (GP)

Partnerships share many similarities with sole proprietorships with the primary difference being that the business has two or more owners. Of the two types of partnerships, the general partnership is structured such that all partners actively manage the business and share in the profit and losses.  Partnerships report their income and expenses on Form 1065.   

​

Advantages of a General Partnership​

• No corporate formalities or paperwork requirements, such as bylaws, meeting minutes, etc. 

• You are not forced to absorb all of any business losses on your own because the partners divide the profits and losses according to their ownership percentages. 

• Owners can deduct most business losses from their personal tax returns. 

• Easy to start as a GP does not have to be registered with the state 

 

Disadvantages of a General Partnership​

• Each owner is personally liable for the business's debts and other liabilities

• In certain states, each partner may be personally liable for another partner's negligent actions or behavior (referred to as "joint and several liability")

• Disputes among partners can wreak havoc on the functionality of the business

• It is more difficult to get a business loan and build the business credit without a registered business entity

​

Like a sole proprietorship, a GP is the default mode of ownership for multiple-owner businesses. Most people choose to form partnerships to lower the risk of starting a business since you do not have to go about the process on your own. Rather, you can have multiple people sharing in the struggles and successes along the way.