How to Create a General Partnership in Arkansas | A Complete Guide

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Create a General Partnership in Arkansas

If you would like to create a general partnership in Arkansas, there are a few guidelines that you should understand. A general partnership is one of the things that a businessman considers since it comprises two or more entities to carry on a trade or business. Each partner contributes money, property, labor, or special skills, and each partner shares in the profits and losses from the business. You can start an LLC in Arkansas for your general partnership to personally carry potentially unlimited liability.

Knowing about the general partnerships will benefit you and several partners, making you form your business properly. If you want to know more about the general partnership, follow our steps to Create a General Partnership in Arkansas.

Webinarcare Editorial Team will help you create with thorough research and market study. Before starting a general partnership in Arkansas, you must be guided by all the factors we have gathered in this article.

Steps in Creating a General Partnership in Arkansas

What is General Partnership in Arkansas?

A general partnership in Arkansas is a business structure where two or more individuals come together to establish a business and agree to share the profits, losses, and management responsibilities. Each partner contributes skills, resources, and capital to the business and makes decisions collaboratively. In a general partnership, partners have unlimited personal liability for the debts and obligations of the business, meaning their personal assets can be used to cover any debts or liabilities incurred by the partnership. This type of business structure is relatively simple to form and offers flexibility in decision-making and management but lacks the legal protection of limited liability offered by other structures like Arkansas Corporations or limited liability partnerships.

It is recommended that you consult to Arkansas Business Attorney before beginning the process of forming your general partnership. They will understand what is best for you and your company. To shield your personal assets from corporate debts, you can always Start an LLC in Arkansas rather than a general partnership.

– WEBINARCARE EDITORIAL TEAM

Example of a General Partnership

An example of a general partnership could be a small marketing agency created by two friends, Shane and Jane. Shane has a background in graphic design, while Jane has experience in digital marketing strategies. They decide to join forces and create a marketing agency that offers clients a combination of their expertise.

Shane and Jane contribute their skills, resources, and capital to start the business. They agree to share the profits, losses, and management responsibilities. Both partners actively participate in the agency’s day-to-day operations, making decisions and working with clients collaboratively.

In this general partnership, Shane and Jane have unlimited personal liability for any debts or obligations incurred by their marketing agency. If the agency faced financial difficulties, both partners’ personal assets could be used to cover the debts. However, the simplicity and flexibility of the general partnership structure allow them to manage and grow their business together easily.

Individuals looking to collaborate and numerous service providers have chosen general partnerships as their preferred business entity. That’s frequently because of its simple design, low price, and simplicity of setup. Some general partnership examples include: 

  • Providing Professional Services (architectural firms, medical clinics, etc.)
  • Selling goods at retail 
  • Opening a restaurant
  • Arkansas Business Consulting

General partnerships are also formed by partners who are spouses or other family members who want to operate a business together.

Steps in Creating a General Partnership in Arkansas

To create a general partnership in Arkansas, you must follow the guidelines below: choosing a business name, making a partnership agreement, requesting an EIN, getting a license and permit, and opening a bank account. 

Step 1: Choose a Business Name

Naming your business is one of the most important activities during the startup phase, especially if you will form an LLC in Arkansas. Your general partnership name serves as the foundation for your brand and is what clients use to connect you to the products or services you offer. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity without being hampered by irrelevant factors. 

For example, let’s assume the general partnership focuses on providing eco-friendly landscaping solutions. A potential name for this partnership could be “GreenScape Innovations.” This name highlights the business’s core values (eco-friendly) while also showcasing the industry (landscaping) and the innovative approach the partners aim to bring to the market.

For your to come up with this business name idea, here are some guidelines to consider when choosing a name for a general partnership:

  • Reflect on the Nature of the Business: Choose a name representing your products or services, and communicate your business’s essence to your target audience.
  • Keep it Simple and Memorable: A short, easy-to-pronounce name will be easier for customers to remember and share with others.
  • Make it Unique: Research the names of other businesses in your industry to ensure your chosen name stands out and does not infringe on any existing trademarks or copyrights.
  • Consider the Partners’ Names: Some general partnerships incorporate the partners’ names in the business name (e.g., Smith & Johnson Consulting). However, this approach may only be suitable for some businesses, especially if the names are difficult to pronounce or remember.
  • Test the Name: Share the potential name with friends, family, and potential clients to gather feedback and ensure it resonates with your target audience.
  • Check for Domain Availability: Research the availability of your chosen name as a domain name for your website and on social media platforms to ensure a consistent online presence.
  • Avoid Limiting your Business Scope: Choose a flexible name to accommodate future product or service changes. Avoid using specific locations, product names, or niche markets in the name if you plan to expand or diversify later.
  • Comply with Legal Requirements: Ensure the chosen name complies with any legal requirements or restrictions in your jurisdiction, such as avoiding misleading or offensive terms.
  • Consider Professional Input: Consult with Arkansas Business Attorney or trademark specialist to ensure your chosen name is legally sound and can be registered as a trademark if necessary.

By following these guidelines, you can choose a name for your general partnership that is memorable, unique, and effectively communicates your business’s essence.

In addition, most general partnership businesses use the last name of all of their partners.  For instance, if Jennie Kim and Lalisa Manoban enter business together, the partnership name is “Kim & Manoban” by default. However, if you would like to form a business name under something more appropriate, such as “EJI Design and Build,” then you’ll need to File a DBA in Arkansas with Arkansas Secretary of State.

Filing a DBA in Arkansas has three methods, online, by mail, and in person filing., which costs around $22.50 for filing online, $25 for filing by mail or in-person. There is Indefinite validity in renewing your DBA. 

In Arkansas, if you do not wish to file your general partnership business right away but want to hold the name that you have decided on, then you can reserve your business name for 120 days. You must file a name reservation application in the Arkansas Secretary of State to keep the name. 

Step 2: Make a Partnership Agreement

After you have chosen a business name for your general partnership, the next step would be making a partnership agreement in Arkansas. A partnership agreement is a crucial document that outlines the terms and conditions governing a partnership. It helps to establish a clear understanding of each partner’s roles, responsibilities, and expectations and prevents disputes and misunderstandings.

Additionally, it discusses business management guidelines and potential contingencies that may arise, such as a partner’s passing or a partner’s decision to leave the partnership.

A partnership agreement should include the following:

  • Business name
  • Description of the business
  • Contact information of the business and its owners

Ownership of all business partners, decision-making, capital contribution, profits and distribution, death and disability, and withdrawal and addition of partners is one of the key factors to consider when forming or creating a partnership agreement. In this way, all business partners will understand what this is all about and how to proceed if the mentioned scenarios happen. 

Without a partnership agreement, your company will often be subject to the general partnership default laws of Arkansas. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Arkansas

After completing the partnership agreement, you should get or seek an Employer Identification Number (EIN) in Arkansas. An EIN will serve as your general partnership’s tax identification number. The Internal Revenue Service can provide you with an EIN. (IRS). It is a nine-digit number comparable to your Social Security number. EIN, on the other hand, is distinct from SSN. It is exclusively used for business-related operations, such as filing general taxes. The form must be filled out and sent to the IRS website. Obtaining an EIN cost between $30 and $280. 

The application of an EIN in Arkansas can be through the following:

  • Apply Online- The Online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4PDF application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

You can benefit in various ways once you obtain your EIN number. It will give your general partnership the final advantage to operate at its full potential without legal or court problems.

Step 4: Get a License and a Permit

You must have Arkansas Business License before your general partnership business operates. A business license is a document granted by a government agency that allows you to operate your business in the territory governed by that agency.

To legally operate your partnership, you’ll need a business license. You may need more than one license in Arkansas. Numerous general partnership licenses need to be filed and renewed regularly.

In Arkansas, the business license fee costs about $50 – $300.

You can check out the United States Business License & Licensing Fee Resources for more information about the costs in Arkansas.

Step 5: Open a Bank Account

After filing and receiving your general partnership license, you should open a bank account for yourself, your clients, and your employees.

A US bank account may make your business dealings in Arkansas easier because it increases your company’s authenticity and profitability. Most banks require an EIN for firms other than sole proprietorships to open a business account. Keeping separate finances also prevents you from combining personal and professional finances.

If you would like to open a bank account in Arkansas, check out the Best Bank for Arkansas Small Business.

Pros and Cons of a General Partnership in Arkansas

In forming a general partnership in Arkansas, there are pros and cons that you may experience. I will list the pros and cons for you to understand why and how a general partnership is crucial. 

Pros of Forming a General Partnership in Arkansas

  • Easy and Inexpensive to Form: General partnerships are relatively simple to establish, requiring minimal paperwork and registration costs compared to other business structures like corporations or limited liability companies.
  • Decision-Making: Partners can pool their skills, knowledge, and resources, leading to more efficient and effective decision-making and business operations.
  • Flexibility: General partnerships offer flexibility in management structure, profit distribution, and decision-making processes, allowing partners to customize their business relationships to best suit their needs.
  • Tax Benefits: In most jurisdictions, general partnerships are not taxed as separate entities. Instead, profits and losses are passed through to the partners, who report them on their income tax returns. This avoids the issue of double taxation that affects corporations.
  • Greater Access to Capital: With multiple partners, a general partnership may have increased access to capital and resources compared to a sole proprietorship.

Cons of Forming a General Partnership in Arkansas

  • Unlimited Personal Liability: In a general partnership, all partners have unlimited personal liability for the debts and obligations of the business. This means that each partner’s personal assets can be used to cover any debts incurred by the partnership, which can be a significant risk.
  • Potential for Conflicts: As partners share management and decision-making responsibilities, disagreements or conflicts can arise, negatively impacting the business’s operations and success.
  • Limited Lifespan: A general partnership’s existence is often tied to the lives of its partners. The partnership may be dissolved if a partner withdraws, becomes incapacitated, or dies, potentially leading to instability and uncertainty.
  • Difficulty in Raising Capital: While general partnerships may have more access to capital than sole proprietorships, they may still need help raising funds compared to corporations or limited liability companies, as investors may be more hesitant to invest in a business with unlimited personal liability.
  • Lack of Legal Distinction: Unlike corporations or limited liability companies, general partnerships do not have a separate legal identity from their partners, limiting the partnership’s ability to enter into contracts or own property in its name.

When considering a general partnership, weighing the pros and cons and assessing whether this business structure aligns with your goals, risk tolerance, and desired level of management involvement is essential.

Maintain Business License in Arkansas

You must maintain or renew your business license regularly now that you have established your general partnership. Make time at least once a year to check the status of your licenses. Then you will get everything important. You can deal with any problems that arise. In Arkansas, the business license fee ranges from $50 – $300, and varies by jurisdiction and license type.

Pay Your Taxes in Arkansas

Even if you have established your general partnership in Arkansas, pay your taxes and keep everything up to date so you won’t pay any penalty. 

Arkansas taxes information will help you with what to pay before or during the operation of your professional corporation. You can check out the Arkansas Small Business Taxes to further understand why you must pay your taxes on time. 

Can I Convert My General Partnership Into Another Business Entity in Arkansas?

By following the appropriate state procedures, you can convert your general partnership into another business entity, such as Arkansas Corporation converting to an LLC; or Sole Proprietorship to Arkansas LLC. This may involve filing conversion documents with the Arkansas Secretary of State’s office and paying any required fees.

FAQs

What is a general partnership in Arkansas?
A general partnership in Arkansas is a business structure where two or more people own and manage the company together.
Can a partnership be formed among residents of different states?
Yes, a partnership can be formed between people from different U.S. states, including Arkansas.
Can a general partnership be registered in Arkansas?
While it is not a legal requirement to register a general partnership in Arkansas, it is recommended to do so in order to protect the business name and separate it from the personal assets of each partner.
What are the requirements to form a general partnership in Arkansas?
To form a general partnership in Arkansas, at least two people are required, and there needs to be an agreement between the partners that outlines how profits, liabilities, and management responsibilities are shared among the partners.
How can I find a partner to start a business with in Arkansas?
Networking events and online platforms, such as LinkedIn, can help you find potential business partners in Arkansas.
What is the process of registering a partnership in Arkansas?
To register a general partnership in Arkansas, you can submit a Partnership Registration form and pay a filing fee to your local government.
What is the minimum age requirement for partners in a general partnership in Arkansas?
There is no minimum age requirement for partners in a general partnership in Arkansas, but a legal guardian must sign on behalf of minors.
Are there any annual filing or reporting requirements for a general partnership in Arkansas?
There are no annual filing requirements for Arkansas general partnerships. However, partners are personally responsible for their partnerships’ income tax reporting.
Is personal liability for business debts shared equally among partners in Arkansas?
Personal liability for business debts is typically shared equally among partners in an Arkansas general partnership, meaning partners’ personal assets could be used to pay off business debts.
What is a partnership agreement, and why do I need one in Arkansas?
An Arkansas partnership agreement outlines each partner’s responsibilities, ownership percentage, profit distributions, and dispute resolution plans. It is helpful to prevent future conflicts among partners.
Are partners personally responsible for the actions of other partners in Arkansas?
In an Arkansas general partnership, each partner is legally responsible and liable for their actions and any resulting consequences.
How long does it take to form a partnership in Arkansas?
It typically takes around one week to form and register a general partnership in Arkansas.
Can a partner take on outside work in Arkansas while operating as a partner?
Yes, it is typically allowed for partners in Arkansas to conduct outside work while still being an active partner in the general partnership.
Who must sign the partnership agreement in Arkansas for it to be legally binding?
All partners should sign the partnership agreement in Arkansas for it to be legally binding.
Are general partnerships required to pay state taxes in Arkansas?
No, general partnerships in Arkansas are not subject to statutory company taxes. Individual partners are responsible for personal income tax payments.
How can I dissolve a general partnership in Arkansas?
To dissolve an Arkansas general partnership, partners must dissolve the corporation in writing and distribute assets based on their partnership agreement.
Can I change details in an existing partnership agreement in Arkansas?
Yes, amendments can be made to partnership agreements but must be approved by all partners.
Do terminated partners have ownership of the company’s assets in Arkansas?
No, terminated partners in an Arkansas general partnership have no ownership rights to the company’s assets.
How can I get the names of all partners in a general partnership in Arkansas?
You can obtain this information through the Arkansas Secretary of State online when you search for the general partnership registration.
Can partnerships limit who can manage the company in Arkansas?
Yes, the partnership agreement in Arkansas can limit which partners have the authority to manage their businesses.
Is a buyout clause recommended in an Arkansas partnership agreement?
Including a buyout clause in the partnership agreement is recommended in Arkansas to provide exit strategies for each partner and prevent future conflicts.
Does an Arkansas general partnership have perpetual existence?
No, unless specified in the partnership contract, an Arkansas general partnership will dissolve upon any changes made to its partners’ bodies or memberships.
Does transferring partnership ownership result in dissolving in Arkansas?
Only if the partnership agreement specifically indicates that the addition or termination of partners under certain conditions would result in dissolution of the partnership.
Is forming a limited liability partnership (LLP) different from a general partnership in Arkansas?
Yes, a limited liability partnership in Arkansas separates personal liability from professional actions of management, while in a general partnership, partners are personally responsible for business debt.
How would I legally protect the name of my Arkansas general partnership from trademark infringement?
By registering for a trademark with the Arkansas Secretary of State or the United States Patent and Trademark Office.
How can I convert my general partnership to another type of entity in Arkansas?
Usually, conversions require dissolving one partnership and creating the other. It is legal to reapply and rebuild from the dissolved business.
Who in the partnership is liable for bank loans in Arkansas?
Partners generally partner of an Arkansas general association could equally own and operate loans the services defines as the forward agreement, such services must be clearly publicly disclosed.
Is the status of business income legal advice significant to Arkansas tax payers?
Yes, recognition relating to tracking partnership returns and related fields of business operations that licensed association businesses country permitted status in Arkansas.
How do I form a general partnership in Arkansas?
To form a general partnership in Arkansas, you need to file a certificate of partnership with the Arkansas Secretary of State.
What are the advantages of forming a general partnership in Arkansas?
Advantages of forming a general partnership in Arkansas include simplicity of formation, shared liability among partners, and pass-through taxation.
What are the disadvantages of forming a general partnership in Arkansas?
Disadvantages of forming a general partnership in Arkansas include unlimited personal liability for all partners and joint and several liability.
Are there any legal requirements imposed by the State when opening a general partnership in Arkansas?
Yes, the State requires you to file a Certificate of Partnership with the Arkansas Secretary of State to establish your general partnership.
Can anyone start a general partnership in Arkansas?
Yes, anyone can start a general partnership in Arkansas as long as there are at least two partners involved.
How long does it take to form a general partnership in Arkansas?
It typically takes a few days to a week to get the necessary paperwork filed with the state and establish the partnership.
Can a general partnership in Arkansas have employees?
Yes, a general partnership in Arkansas can have employees.
How are general partnership profits taxed in Arkansas?
General partnership profits in Arkansas are taxed as personal income for each partner.
Can I change the partnership agreement once it is filed with the state in Arkansas?
Yes, the partnership agreement can be amended as long as all partners agree to the changes.
What is the cost to form a general partnership in Arkansas?
The cost to form a general partnership in Arkansas includes a filing fee of $50 and possible attorney fees.
How is personal liability structured among partners in a general partnership in Arkansas?
Partners in a general partnership in Arkansas have unlimited personal liability and share liability equally.
Do I need a lawyer to form a general partnership in Arkansas?
No, you do not need a lawyer to form a general partnership in Arkansas, but it is recommended.
Can I form a general partnership in Arkansas with a corporation or LLC?
Yes, a general partnership in Arkansas can be formed with a corporation or LLC as one of the partners.
Are general partnerships required to have a partnership agreement in Arkansas?
No, but it is recommended to have a partnership agreement in Arkansas to clarify the rights and responsibilities of each partner.
What is the role of each partner in a general partnership in Arkansas?
Each partner in a general partnership in Arkansas contributes to the business and shares in the profits and losses.
What is required to dissolve a general partnership in Arkansas?
To dissolve a general partnership in Arkansas, all partners must agree to the dissolution and file an agreement of dissolution with the Arkansas Secretary of State.
How are disputes among partners in a general partnership resolved in Arkansas?
Disputes among partners in a general partnership in Arkansas can be resolved through mediation, arbitration or litigation in court.
Do I need to register my general partnership in Arkansas with local government?
There is no requirement to register your general partnership in Arkansas with local government, outside of any necessary business licenses.
Can a partnership agreement in Arkansas be altered between partners?
Yes, the partnership agreement in Arkansas can be altered between partners as long as all partners agree.
Do I need to file taxes for my general partnership in Arkansas?
Yes, partners in a general partnership in Arkansas must file personal income taxes on their share of the profits.
How many partners are required to form a general partnership in Arkansas?
At least two partners are required to form a general partnership in Arkansas.
What are the consequences of not filing a certificate of partnership in Arkansas?
Failure to file a certificate of partnership could result in fines or other legal consequences.
Where do I get the certificate of partnership form in Arkansas?
The certificate of partnership form can be downloaded from the Arkansas Secretary of State’s website or obtained from a business attorney.
How many general partnerships are there in Arkansas?
There is no official count of how many general partnerships are in Arkansas, but many small and medium-sized enterprises operate as general partnerships.
Can a general partnership in Arkansas hold property?
Yes, a general partnership in Arkansas can hold property.
Are there any professional licenses or certifications required for a general partnership in Arkansas?
Certain professions may require a license before opening a general partnership, such as medical professionals or attorneys.
What is the liability of partners in a general partnership in Arkansas?
Partners in a general partnership in Arkansas have unlimited personal liability for all debts and obligations of the partnership.

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Conclusion

A general partnership can be viable for individuals looking to establish a business in Arkansas with shared decision-making, management responsibilities, and profits. This type of business structure is relatively simple to establish and offers flexibility in operations. However, it is essential for potential partners to carefully consider the unlimited personal liability aspect of general partnerships, which means that each partner’s personal assets could be at risk to cover any debts or obligations incurred by the business. Before forming a general partnership, the partners should have a clear and well-drafted partnership agreement that outlines the roles, responsibilities, profit-sharing, and dispute-resolution mechanisms to ensure a smooth working relationship and minimize potential conflicts. Partners should also explore other business structures, like limited liability partnerships or corporations, to determine the best fit for their needs and goals.

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