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


Steve Bennett
Steve Bennett
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Create a General Partnership in Colorado

If you would like to create a general partnership in Colorado, 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 Colorado 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 Colorado.

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

What is General Partnership in Colorado?

A general partnership in Colorado 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 Colorado Corporations or limited liability partnerships.

It is recommended that you consult to Colorado 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 Colorado rather than a general partnership.

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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
  • Colorado 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 Colorado

To create a general partnership in Colorado, 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 Colorado. 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 Colorado 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 Colorado with Colorado Department of Revenue.

Filing a DBA in Colorado has one method, online filing, which costs around $20. There is one year validity in renewing your DBA. 

In Colorado, 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 Colorado Department of Revenue 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 Colorado. 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 Colorado. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Colorado

After completing the partnership agreement, you should get or seek an Employer Identification Number (EIN) in Colorado. 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 Colorado 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 Colorado 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 Colorado. Numerous general partnership licenses need to be filed and renewed regularly.

In Colorado, 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 Colorado.

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 Colorado 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 Colorado, check out the Best Bank for Colorado Small Business.

Pros and Cons of a General Partnership in Colorado

In forming a general partnership in Colorado, 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 Colorado

  • 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 Colorado

  • 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 Colorado

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 Colorado, the business license fee ranges from $50 – $300, and varies by jurisdiction and license type.

Pay Your Taxes in Colorado

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

Colorado taxes information will help you with what to pay before or during the operation of your professional corporation. You can check out the Colorado 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 Colorado?

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

FAQs

What is a general partnership in Colorado?
A Colorado general partnership is an unincorporated business entity owned by two or more partners who share equal responsibility for the management and operations of the business.
What are the benefits of a general partnership in Colorado?
Some benefits of a general partnership in Colorado include no corporate taxes, flexible management structure, and easy formation.
What are the disadvantages of a general partnership in Colorado?
Some disadvantages of a general partnership in Colorado include unlimited personal liability for all partners and potential conflicts with other partners over management and direction of the business.
How do I create a general partnership in Colorado?
You can create a general partnership in Colorado by filing a Statement of Partnership Authority with the Colorado Secretary of State and drafting a partnership agreement.
Is a partnership agreement required in Colorado?
No, a partnership agreement is not required in Colorado, but it is highly recommended to establish clear guidelines for running the business and resolving disputes.
How many partners can a general partnership have in Colorado?
A general partnership in Colorado must have at least two partners, but there is no limit on the maximum number of partners.
Can a general partnership have a sole proprietor as a partner in Colorado?
Yes, a general partnership in Colorado can have a sole proprietor as one of its partners.
What is the difference between a general partnership and a limited partnership in Colorado?
A general partnership in Colorado has unlimited liability for all partners, while a limited partnership has at least one partner with limited liability.
Who is responsible for taxes in a Colorado general partnership?
Each partner in a Colorado general partnership is personally responsible for paying their share of taxes on the partnership’s income.
How do I obtain an EIN for my Colorado general partnership?
You can obtain an EIN for your Colorado general partnership by applying online with the IRS or by completing a paper Form SS-4.
What legal documents are required to form a general partnership in Colorado?
The only required legal document to form a general partnership in Colorado is the Statement of Partnership Authority, but a partnership agreement is highly recommended.
Can I change the partnership structure of my Colorado general partnership later on?
Yes, you can change the partnership structure of your Colorado general partnership later on by amending the partnership agreement or filing a new Statement of Partnership Authority.
How do I dissolve a Colorado general partnership?
You can dissolve a Colorado general partnership by mutual agreement of the partners or by filing a Statement of Dissolution with the Colorado Secretary of State.
Who owns assets in a Colorado general partnership?
Assets in a Colorado general partnership are owned jointly by all partners and technically belong to the partnership itself.
How are profits and losses divided in a Colorado general partnership?
Profits and losses are typically divided equally among all partners in a Colorado general partnership, unless otherwise specified in the partnership agreement.
What happens if a general partnership partner passes away in Colorado?
If a partner passes away in a Colorado general partnership, their management duties and shares of the partnership are typically passed on to their heirs or designated beneficiaries.
What type of liability do general partnership partners have in Colorado?
General partnership partners in Colorado have unlimited personal liability for the debts and responsibilities of the business.
How do I create and file a Colorado Statement of Partnership Authority?
You can create and file a Colorado Statement of Partnership Authority online through the Colorado Secretary of State’s website or by submitting a paper form by mail.
What is the fee to file a Statement of Partnership Authority in Colorado?
The fee to file a Statement of Partnership Authority in Colorado is $50, or $100 for expedited processing.
How often do I need to renew my Colorado general partnership?
Colorado general partnerships do not need to be renewed annually. However, they must file an annual report with the Colorado Secretary of State and pay a fee of $10.
Can nonresident aliens be partners in a Colorado general partnership?
Yes, nonresident aliens can be partners in a Colorado general partnership as long as they have a valid IRS tax ID number and a U.S. address.
What is the duration of a Colorado general partnership?
The duration of a Colorado general partnership is typically continuous until dissolved by mutual agreement or other legal means.
Are general partnerships in Colorado required to maintain annual meetings?
No, general partnerships in Colorado are not required to maintain annual meetings.
How can I terminate a general partnership in Colorado?
You can terminate a general partnership in Colorado by filing a Statement of Dissolution with the Colorado Secretary of State.
What happens if a partner in a Colorado general partnership wants to sell their share of the business?
If a partner in a Colorado general partnership wants to sell their share of the business, they must obtain the agreement of the other partners or follow the procedures outlined in the partnership agreement.
Is it required to register a general partnership in Colorado at the county level?
No, general partnerships in Colorado are only required to be registered with the Colorado Secretary of State.
Can minors be partners in a Colorado general partnership?
Minors in Colorado cannot enter into legal contracts, including partnership agreements, so they cannot be partners in a Colorado general partnership.
How are disputes among partners resolved in a Colorado general partnership?
Disputes among partners in a Colorado general partnership are typically resolved through mediation or arbitration, as outlined in the partnership agreement.
What are the requirements to form a general partnership in Colorado?
To form a general partnership in Colorado, you need to file a Certificate of Partnership with the Colorado Secretary of State’s office and designate a registered agent for service of process in the state.
Can I form a general partnership in Colorado without an attorney?
Yes, you can form a general partnership in Colorado without the help of an attorney, but it’s always advisable to consult with one for legal or tax advice to avoid any unforeseen complications.
How much does it cost to register a general partnership in Colorado?
The cost to register a general partnership in Colorado is $50 for the Certificate of Partnership filing fee.
How long does it take to register a general partnership in Colorado?
The processing time for a certificate of partnership in Colorado is typically between 3-7 days.
What is the name availability requirement to form a general partnership in Colorado?
The name of a general partnership of Colorado should end with “LP,” “L.P.,” “limited partnership,” “Ltd.,” or “limited,” “LTD,” or “Ltd”, unless the general partnership comprises one or more licensed professionals.
Can I use a name that is not registered with the Colorado Secretary of State when forming a general partnership?
Yes, you can use a name that is not registered with the Colorado Secretary of State when forming a general partnership if no one else is using that name.
Can a general partnership be operated under a different name?
Yes, a general partnership in Colorado can operate under a different name, but it should also register the name separately with the Colorado Secretary of State’s office.
What type of taxes does a general partnership in Colorado need to pay?
A general partnership in Colorado does not pay taxes as an entity. Rather, the partnership’s profits and losses are passed through to the general partners, who then report their share of income or losses on their personal tax returns.
Do I need to obtain any licenses or permits to form a general partnership in Colorado?
Licensing and permit requirements vary depending on the nature of the business, but in Colorado, general partnerships don’t need a license to operate.
Can I form a general partnership with a non-resident of Colorado?
Yes, you can form a general partnership with a non-resident, but the registered agent you designate for service of process should have a physical address in Colorado.
Do I need to file any annual reports for a general partnership in Colorado?
In Colorado, general partnerships are not required to file annual reports with the Secretary of State.
Can a general partnership in Colorado be dissolved voluntarily?
Yes, a general partnership in Colorado can be dissolved voluntarily when all general partners agree.
What happens to a general partnership in Colorado if a general partner dies or leaves the partnership?
When a general partner lefts or dies, it may dissolve the partnership unless otherwise agreed to by the remaining general partners.
What are some liability risks associated with a general partnership in Colorado?
All partners in a general partnership in Colorado are personally liable for the partnership’s debts, obligations, and other legal issues.
Can I use a business name instead of a personal name when forming a general partnership in Colorado?
Yes, you can use a business name instead of a personal name when forming a general partnership in Colorado, but the business name should be registered with the Colorado Secretary of State.
Can a general partnership have more than one business name registered?
Yes, a General Partnership in Colorado may register more than one business name for different purposes.
What happens if there is a dispute between partners in a general partnership in Colorado?
If a dispute arises between partners in a general partnership in Colorado, they should try to resolve it on their own. If that isn’t possible, though, the partners may want to consider mediation or litigation.
Can a general partnership in Colorado have both limited and general partners?
Yes, a general partnership in Colorado can have both limited and general partners. However, those with control have more personal liability for partnership obligations. Therefore, a limited partnership will reduce liability risks for limited partners.
What are some differences between a general partnership and a limited partnership in Colorado?
With a general partnership, all partners have equal rights and responsibilities for managing the business and are personally liable for their partnership’s debts and liabilities; with limited partnerships, there are general partners and limited partners. By my reasoning, a limited partnership can only make some selections affecting the business operations.
Is it best to have a written agreement for a general partnership in Colorado?
Yes, It’s always better to have a written agreement. A formal written structure upfront among the partners can go on to reduce the likelihood of disputes and controdictory in expectation in future.
What if there are not enough profits to finance all partner interests?
Profits and losses in the General Partnership are distributed among the partners, so if there are no profits to cover partner distributions at a given time, it is best each partner’s profits will offset the loss.
Can multiple general partnerships be formed under the same business name in Colorado?
No. Each general partnership in Colorado requires a unique business name to distinguish between them unless they combine and form an LLP or the same type of business arrangement.
How many people are required to form a General Partnership in Colorado?
At least two people up to any number capable of sharing company with liability depending on the structure of the business.
Can I change a partner in a General Partnership?
Yes. Partners in a general partnership are not permanent, and a general partnership’s managing partners may change relevant documentation regarding that arrangement.
Do I have to list assets and liabilities while registering an LLC?
No. Registered partnership documents partially comprise the partnership agreement, so lists of these data affixed when an operating agreement is created.
When is a partner the most liable?
Ordinarily, with the General Partnership structure, all partners usually govern the company and have equal responsibility and unequaled livability.
Can a membership interest in a Colorado General Partnership be sold or transferred?
Yes, assuming the partnership terms permit such actions. A membership interest is assumed as personal property and may be transferred or filed as collateral in a TNC filing.

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Conclusion

A general partnership can be viable for individuals looking to establish a business in Colorado 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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