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


Steve Bennett
Steve Bennett
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Create a General Partnership in Maryland

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

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

What is General Partnership in Maryland?

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

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

To create a general partnership in Maryland, 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 Maryland. 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 Maryland 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 Maryland with Maryland Department of Assessments and Taxation.

Filing a DBA in Maryland has three methods, online, by mail, and in person filing., which costs around $25 Filing Fee and $50 Expedited Fee. There is five years validity in renewing your DBA. 

In Maryland, 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 30 days. You must file a name reservation application in the Maryland Department of Assessments and Taxation 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 Maryland. 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 Maryland. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Maryland

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

In Maryland, 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 Maryland.

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

Pros and Cons of a General Partnership in Maryland

In forming a general partnership in Maryland, 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 Maryland

  • 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 Maryland

  • 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 Maryland

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

Pay Your Taxes in Maryland

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

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

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

FAQs

What is a general partnership in Maryland?
A general partnership in Maryland is an agreement between two or more individuals who want to operate a business together.
What are the benefits of forming a general partnership in Maryland?
Some benefits of forming a general partnership in Maryland include ease of formation, shared responsibility and decision-making, and pass-through taxation.
What documents do I need to form a general partnership in Maryland?
To form a general partnership in Maryland, you need to file a certificate of limited partnership with the Maryland Secretary of State.
What is included in a certificate of limited partnership in Maryland?
A certificate of limited partnership in Maryland includes the name and address of the partnership, the name and address of each partner, and a statement of the business purpose.
Can I form a general partnership in Maryland with just one other person?
Yes, you can form a general partnership with just one other person in Maryland.
Do I need to have a written agreement to form a general partnership in Maryland?
While it is not required by law, it is recommended to have a written partnership agreement to avoid any misunderstandings or disputes down the line.
How do I choose a business name for my general partnership in Maryland?
When choosing a business name for your partnership in Maryland, you must ensure that the name is unique and not already in use by another Maryland business. You can check the name availability online through the Maryland Secretary of State’s website.
Do I need to file for a fictitious name/DBA if the business name doesn’t include the last names of all partners?
Yes, if your business name does not include the last names of all partners in your general partnership in Maryland, you should file for a fictitious name/DBA with the state.
How do I dissolve a general partnership in Maryland?
To dissolve a general partnership in Maryland, you should follow the instructions in your partnership agreement. If there is no partnership agreement, the partners can agree on a dissolution plan and file a certificate of cancellation with the Maryland Secretary of State.
What happens to a general partnership in Maryland upon the death or withdrawal of a partner?
In Maryland, when a partner dies or withdraws from a general partnership, the partnership is automatically dissolved unless the partnership agreement provides for continuation.
Can I be held personally liable for debts and obligations incurred by my general partnership in Maryland?
Yes, in a general partnership in Maryland, each partner is personally liable for the debts and obligations of the partnership.
Is there a registration fee to form a general partnership in Maryland?
Yes, there is a registration fee to form a general partnership in Maryland. The fee varies depending on the type of partnership.
Can my general partnership in Maryland be taxed as an S corporation?
No, your general partnership in Maryland cannot be taxed as an S corporation. However, you can elect to have the partnership taxed as a corporation or as a pass-through entity.
How many partners can I have in a general partnership in Maryland?
You can have any number of partners in a general partnership in Maryland.
Can a non-resident of Maryland be a partner in a general partnership in Maryland?
Yes, a non-resident can be a partner in a general partnership in Maryland.
Are general partnerships in Maryland required to have a registered agent?
Yes, general partnerships in Maryland must have a registered agent with a physical address in the state.
Can I change the ownership structure of my general partnership in Maryland?
Yes, you can change the ownership structure of your general partnership in Maryland at any time by amending the partnership agreement and filing the necessary documents with the Maryland Secretary of State.
Can I merge my general partnership in Maryland with another business entity?
Yes, you can merge your general partnership in Maryland with another business entity by following the instructions outlined by the state.
What is the minimum age requirement to be a partner in a general partnership in Maryland?
There is no minimum age requirement to be a partner in a general partnership in Maryland.
Can I legally operate a general partnership without forming it in Maryland if all partners are Maryland residents?
No, if you want to operate a general partnership in Maryland, you must form the partnership in the state regardless of the residency of the partners.
How do I obtain a business license for my general partnership in Maryland?
The requirements for obtaining a business license in Maryland depend on the type of business you are conducting. You can apply for a license through the Maryland Department of Assessments and Taxation.
What should be included in the partnership agreement for my general partnership in Maryland?
A partnership agreement for a general partnership in Maryland should include the names and addresses of all partners, the name and purpose of the partnership, and details regarding how profits and losses will be shared.
Can a general partnership in Maryland be owned by a single member of an LLC?
Yes, a Maryland LLC can be a member of a general partnership in Maryland.
Does a general partnership in Maryland require an operating agreement?
A partnership agreement serves as the operating agreement for a general partnership in Maryland.
Do I need to file formation documents with local or county governments in Maryland?
No, you do not need to file formation documents with local or county governments in Maryland. All filings are done through the Maryland Secretary of State.
Can I register a foreign general partnership to conduct business in Maryland?
Yes, foreign general partnerships can register to conduct business in Maryland by following the appropriate procedures with the state.
What is the liability of limited partners in a limited partnership in Maryland?
Limited partners in a limited partnership in Maryland have limited liability and are typically only liable for the amount of their investment in the partnership.
Can a general partnership in Maryland be converted into a limited partnership?
Yes, a general partnership in Maryland can be converted into a limited partnership by amending the partnership agreement and filing the necessary documents with the Maryland Secretary of State.
What are the advantages of forming a general partnership in Maryland?
Advantages of forming a general partnership in Maryland include the ease of formation, shared management responsibilities, and shared profits and losses among partners.
What are the disadvantages of forming a general partnership in Maryland?
Disadvantages of forming a general partnership in Maryland include potential conflicts between partners, personal liability for partnership debts and obligations, and the need for unanimous decision-making among partners.
How do I register a general partnership in Maryland?
To register a general partnership in Maryland, you must file a Maryland Business Registration Form (Form 1) with the Maryland Department of Assessments and Taxation.
How much does it cost to register a general partnership in Maryland?
The cost to register a general partnership in Maryland is $100.
Do I need an attorney to register a general partnership in Maryland?
No, you do not need an attorney to register a general partnership in Maryland, but it is recommended.
What information do I need to provide on the Maryland Business Registration Form?
On the Maryland Business Registration Form, you will need to provide your partnership’s name, address, partners’ names, and other basic information about your business.
Are there any annual reporting requirements for general partnerships in Maryland?
No, general partnerships in Maryland are not required to file annual reports.
Do Maryland general partnerships need a business license?
Yes, general partnerships in Maryland are required to obtain a business license.
What taxes does a Maryland general partnership need to pay?
Maryland general partnerships are subject to the state’s income tax rate of 8.25%, as well as federal taxes.
Can a non-resident of Maryland be a partner in a Maryland general partnership?
Yes, non-residents can be partners in a Maryland general partnership.
Can a Maryland general partnership do business in other states?
Yes, a Maryland general partnership can do business in other states, but it must register in those states before conducting business there.
Can a Maryland general partnership change its name?
Yes, a Maryland general partnership can change its name by filing an Amended Maryland Business Registration Form.
Can I add partners to my Maryland general partnership?
Yes, you can add partners to your Maryland general partnership by obtaining unanimous consent from existing partners.
Can I remove partners from my Maryland general partnership?
Yes, you can remove partners from your Maryland general partnership by obtaining unanimous consent from existing partners.
Should I get a partnership agreement for my Maryland general partnership?
Yes, it is highly recommended that partners enter into a partnership agreement that outlines the terms of the partnership.
Who is liable for partnership debts in a Maryland general partnership?
In a Maryland general partnership, partners are jointly and severally liable for partnership debts and obligations.
Can I limit my personal liability as a partner in a Maryland general partnership?
No, partners in a Maryland general partnership cannot limit their personal liability for partnership debts and obligations.
How are profits and losses distributed in a Maryland general partnership?
Profits and losses are distributed among partners based on the partnership agreement.
Can a partner in a Maryland general partnership be an employee of the partnership?
Yes, a partner in a Maryland general partnership can also be an employee of the partnership.
Can a partner in a Maryland general partnership be a passive investor?
Yes, a partner in a Maryland general partnership can be a passive investor and not participate in the management of the partnership.
What happens if a partner withdraws or dies in a Maryland general partnership?
If a partner withdraws or dies in a Maryland general partnership, the partnership may dissolve, or the remaining partners may choose to continue the partnership.
Is a partnership agreement required for a Maryland general partnership?
While not legally required, a partnership agreement is highly recommended for Maryland general partnerships.
Can a Maryland general partnership have a DBA (doing business as) name?
Yes, a Maryland general partnership can have a DBA name.
What must be included in a DBA name for a Maryland general partnership?
A DBA name for a Maryland general partnership must include the words “Partner” or “Partnership.”
How long does it take to form a general partnership in Maryland?
It generally takes about two to four weeks to form a general partnership in Maryland.
What is the minimum number of partners required to form a Maryland general partnership?
There is no minimum number of partners required to form a Maryland general partnership.
What is the maximum number of partners allowed in a Maryland general partnership?
There is no maximum number of partners allowed in a Maryland general partnership.
Can a corporation be a partner in a Maryland general partnership?
Yes, a corporation can be a partner in a Maryland general partnership.

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Conclusion

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