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

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Create a General Partnership in Maine

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

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

Steps in Creating a General Partnership in Maine

What is General Partnership in Maine?

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

It is recommended that you consult to Maine 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 Maine 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
  • Maine 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 Maine

To create a general partnership in Maine, 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 Maine. 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 Maine 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 Maine with Maine Department of Professional and Financial Regulation.

Filing a DBA in Maine has two methods, by mail and in person., which costs around $125 for Assumed Name filing and $40 for Fictitious Name filing. There is Indefinite validity in renewing your DBA. 

In Maine, 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 Maine Department of Professional and Financial Regulation 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 Maine. 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 Maine. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Maine

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

In Maine, 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 Maine.

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

Pros and Cons of a General Partnership in Maine

In forming a general partnership in Maine, 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 Maine

  • 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 Maine

  • 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 Maine

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

Pay Your Taxes in Maine

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

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

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

FAQs

What is a general partnership in Maine?
A general partnership in Maine is a business structure in which two or more people are co-owners of a business with shared profits, losses, and responsibilities.
What is required to form a general partnership in Maine?
To form a general partnership in Maine, you must file a Certificate of Partnership with the Maine Secretary of State, pay a filing fee, and have a written partnership agreement.
How many people are required to form a general partnership in Maine?
A general partnership in Maine requires at least two people to form.
What is a partnership agreement in the state of Maine?
A partnership agreement is a written document that outlines the details of the partnership, including how profits and losses are shared, how decisions are made, and each partner’s role and responsibilities.
Can a general partnership be formed without a written agreement in Maine?
While a written partnership agreement is not required in Maine, it is strongly recommended to prevent any misunderstandings or disputes among partners.
How long does it take to form a general partnership in Maine?
The time it takes to form a general partnership in Maine varies depending on how quickly the partnership agreement is drafted and the processing time for the Certificate of Partnership filing, which can take up to 10 days.
Does a general partnership in Maine require a business license?
Depending on the type of business and location, a general partnership in Maine may require a state and/or local business license to operate legally.
What taxes must a general partnership in Maine pay?
A general partnership in Maine does not pay income taxes at the partnership level. Instead, the partners pay taxes on their share of the profits on their personal income tax returns.
Can a general partnership have a DBA name in Maine?
Yes, a general partnership in Maine can have a “doing business as” (DBA) name if it registers the name with the Maine Secretary of State and complies with other state and local requirements.
Does Maine law require certain partners to have specific roles in a general partnership?
Maine law does not require partners to have specific roles in a general partnership, but each partner’s role and responsibilities should be outlined in the partnership agreement.
Can a general partnership in Maine be sued or sue in its own name?
No, a general partnership in Maine cannot sue or be sued in its own name. Instead, each partner is individually liable for the debts and obligations of the partnership.
Can a partnership agreement be amended in Maine?
Yes, a partnership agreement in Maine can be amended by unanimous consent of the partners or according to the terms outlined in the agreement.
What type of insurance should a general partnership in Maine have?
A general partnership in Maine should have liability insurance to protect against lawsuits or damages caused by the partnership’s activities or products.
Can a non-resident of Maine be a partner in a general partnership in the state?
Yes, a non-resident can be a partner in a general partnership in Maine as long as the Certificate of Partnership is filed with the Maine Secretary of State.
Can a partnership agreement restrict a partner from leaving the partnership in Maine?
A partnership agreement in Maine can include provisions that outline the conditions for a partner leaving the partnership, but it cannot strictly prohibit a partner from leaving.
Is there a minimum capital requirement for a general partnership in Maine?
No, there is no minimum capital requirement for a general partnership in Maine.
Can a partnership agreement in Maine disclaim one partner’s liability for debts and losses?
No, a partnership agreement in Maine cannot disclaim any partner’s liability for debts and losses incurred by the partnership.
Can partners in a general partnership in Maine have unequal ownership and profits distributions?
Yes, partners in a general partnership in Maine can have unequal ownership and profits distributions as long as it is outlined in the partnership agreement and agreed upon by all partners.
Can a partnership agreement in Maine require partners to contribute different amounts of capital?
Yes, a partnership agreement in Maine can require partners to contribute different amounts of capital as long as it is outlined in the agreement and agreed upon by all partners.
Can a partnership agreement in Maine specify how profits and losses are distributed?
Yes, a partnership agreement in Maine can specify how profits and losses are distributed among partners as long as it is outlined in the agreement and agreed upon by all partners.
What happens if a partner dies or becomes incapacitated in a general partnership in Maine?
The partnership agreement in Maine may delineate the course of action to take, such as dissolve or redistribute the departed party’s interest.
Can one partner dissolve a general partnership in Maine without the agreement of other partners?
No, one partner cannot dissolve a general partnership in Maine without the agreement of the other partners.
What steps must a partnership take to dissolve in Maine?
To dissolve a partnership in Maine, the dissolution must be agreed upon by all partners and filed with the Maine Secretary of State. Other steps may involve winding up the business, satisfying creditors, and liquidating the partnership assets.
Does a general partnership in Maine have perpetual existence?
No, a general partnership in Maine does not have perpetual existence. The partnership dissolves if a partner dies, withdraws or becomes bankrupt.
Can a general partnership in Maine convert to a different business structure, such as a corporation?
Yes, a general partnership in Maine can convert to a different business structure, such as a corporation, but it must comply with state and federal laws and regulations.
Does Maine require annual reports for general partnerships?
Yes, Maine requires annual reports to be filed with the Secretary of State by general partnerships to remain in good standing.
Can a general partnership in Maine allow admission of new partners when forming or later on?
Yes, a general partnership in Maine can allow for the admission of new partners when it is formed or later on if the partnership agreement accommodates this possibility.
Are there any specific industries that cannot form a general partnership in Maine?
No specific industries are off-limits from forming a general partnership in Maine; however, businesses that involve professional services typically require licenses.
How do I create a general partnership in Maine?
To create a general partnership in Maine, you will need to file a Certificate of Partnership with the Maine Secretary of State.
What information do I need to include on the Certificate of Partnership in Maine?
You will need to include the name of the partnership, the names and addresses of all partners, and the phrase “General Partnership” in the name of the business.
How much does it cost to create a general partnership in Maine?
The fee to file the Certificate of Partnership in Maine is $100.
Do I need to have a written partnership agreement to create a general partnership in Maine?
No, a written partnership agreement is not required to create a general partnership in Maine. However, it is recommended that you have one for clarity on the roles, responsibilities, and profit sharing of partners.
What are the tax implications of a general partnership in Maine?
A general partnership in Maine is considered a pass-through entity for tax purposes, which means that the profits and losses of the business are reported on the partners’ personal tax returns.
What types of businesses can form a general partnership in Maine?
Most types of businesses can form a general partnership in Maine.
Can an out-of-state business form a general partnership in Maine?
Yes, an out-of-state business can form a general partnership in Maine as long as it meets all the requirements set by the state.
How many partners can a general partnership in Maine have?
A general partnership in Maine can have as few as two partners and as many as its members desire.
How long does it take to create a general partnership in Maine?
It takes one to three business days for the Maine Secretary of State to process the Certificate of Partnership.
Can I convert my existing business into a general partnership in Maine?
Yes, an existing business can convert into a general partnership in Maine by filing the appropriate forms with the Secretary of State.
What liability do I have as a partner in a general partnership in Maine?
Partners in Maine are personally liable for the debts and obligations of the partnership.
How is a general partnership in Maine taxed?
A general partnership in Maine is taxed as a pass-through entity, meaning the profits and losses are reported on the partners’ personal tax returns, and the partnership itself does not pay taxes.
Do I need to register my business name in Maine to create a general partnership?
Yes, you will need to register your business name with the Maine Secretary of State before creating a general partnership.
How do I register my business name in Maine?
You can register your business name in Maine by filing a DBA/Trademark form with the Secretary of State.
How often do I need to file an annual report for my general partnership in Maine?
You must file an annual report for your general partnership in Maine once every year.
When is the deadline for filing a annual report for a general partnership in Maine?
The deadline for filing an annual report for a general partnership in Maine is June 1st.
How much is the fee for filing an annual report for a general partnership in Maine?
The fee for filing an annual report for a general partnership in Maine is $85.
Can a general partnership in Maine operate under a different name than its registered business name?
Yes, a general partnership in Maine can operate under a different name than its registered business name by filing for a Assumed Name with secretary of state.
How long does it take to receive my Certificate of Partnership from the Maine Secretary of State?
If you file your Certificate of Partnership online, you should receive it within three business days. If you mail it in or file in-person, it may take longer.
Do I need to get a business license to operate a general partnership in Maine?
Yes, some cities and towns in Maine require businesses to get a business license.
Do I need to collect sales tax for my general partnership in Maine?
If your general partnership in Maine sells goods or services, you may need to collect sales tax.
What is the sales tax rate for businesses in Maine?
The sales tax rate for businesses in Maine is generally 5.5% but varies according to different products and county tax.
What is a foreign general partnership in Maine?
A foreign general partnership in Maine is a partnership formed outside of Maine that wants to do business in the state.
Do I need to register my foreign partnership in Maine?
Yes, a foreign general partnership in Maine must register with the Maine Secretary of State before doing business in the state.
How do I register my foreign general partnership in Maine?
To register your foreign partnership in Maine, you will need to file a Foreign Registration Statement and pay the appropriate fee.
What is the fee to register a foreign general partnership in Maine?
The fee to register a foreign general partnership in Maine is $250.
Can I register my foreign general partnership in Maine online?
No, you cannot register your foreign general partnership in Maine online. You must mail in your registration documents and fee.
Can I dissolve my general partnership in Maine?
Yes, you can dissolve your general partnership in Maine at any time in accordance with the partnership agreement or bylaws set up by the partnership.

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Conclusion

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