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


Steve Bennett
Steve Bennett
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Create a General Partnership in Michigan

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

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

What is General Partnership in Michigan?

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

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

To create a general partnership in Michigan, 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 Michigan. 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 Michigan 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 Michigan with Michigan Department of Licensing and Regulatory Affairs.

Filing a DBA in Michigan has three methods, online, by mail, and in person filing., which costs around $25 for LLCs and $10 for LPs. There is five years validity in renewing your DBA. 

In Michigan, 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 6 months. You must file a name reservation application in the Michigan Department of Licensing and Regulatory Affairs 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 Michigan. 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 Michigan. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Michigan

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

In Michigan, 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 Michigan.

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

Pros and Cons of a General Partnership in Michigan

In forming a general partnership in Michigan, 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 Michigan

  • 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 Michigan

  • 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 Michigan

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

Pay Your Taxes in Michigan

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

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

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

FAQs

What is a general partnership in Michigan?
In Michigan, a general partnership is a legal structure in which two or more people operate a business together and share in the profits.
How do I form a general partnership in Michigan?
To form a general partnership in Michigan, you must file a Certificate of Partnership with the Michigan Department of Licensing and Regulatory Affairs.
Can I form a general partnership in Michigan with just one other person?
Yes, Michigan law allows for two or more people to form a general partnership.
Do I need to have a written partnership agreement to form a general partnership in Michigan?
No, a partnership agreement is not required by Michigan law, but it is strongly recommended.
How do I structure the ownership percentages of a general partnership in Michigan?
Ownership percentages can be structured any way that the partners agree upon, but it should be outlined in the partnership agreement.
What are the tax implications of a general partnership in Michigan?
Michigan does not have a state-level partnership income tax, but the partnership must file an annual tax return at the federal level.
Do I need a business license to operate a general partnership in Michigan?
Possibly, depending on your specific business. Contact your local city or county government for more information.
Can a partnership be terminated in Michigan?
Yes, partnerships can be terminated in Michigan by mutual agreement of the partners, by expiration of the partnership’s term, or by court order.
What happens to partnership assets if the partnership is terminated in Michigan?
Partnership assets are distributed to the partners based on their ownership percentages, after any debts and liabilities are paid off.
Can I change the name of my partnership later on in Michigan?
Yes, you can change the name of your partnership at any time as long as you file the appropriate paperwork with the Michigan Department of Licensing and Regulatory Affairs.
Who is liable for partnership debts and obligations in Michigan?
All partners in a general partnership are personally liable for the business’s debts and obligations.
Can my business be sued as a result of a partner’s actions in Michigan?
Yes, a business can be sued as a result of a partner’s actions in Michigan. All partners are liable for the business’s actions.
Is it possible to change ownership percentages of a partnership in Michigan?
Yes, ownership percentages can be changed at any time with the agreement of all partners.
Do I need a lawyer to form a general partnership in Michigan?
No, a lawyer is not required to form a general partnership in Michigan, but it’s recommended to consult with one to ensure compliance with laws.
Can I sell my partnership interest in Michigan?
Yes, you can sell your partnership interest in a general partnership in Michigan to another individual or entity.
Do I need to obtain any permits or licenses when forming a Michigan partnership?
It depends on the nature of your business. You will need to contact your local city or county government for further guidance.
What is a registered agent and do I need one for my Michigan partnership?
A registered agent is a person or entity that receives legal documents for the partnership. Michigan law requires that partnerships must have a registered agent.
Can I choose anyone to be my registered agent in Michigan?
No, the registered agent in Michigan must have a physical address in the state and must be available during normal business hours to receive legal documents.
Can I form an annual report for my Michigan partnership online?
Yes, Michigan partnerships can file their annual reports online through Michigan’s Department of Licensing and Regulatory Affairs.
How often do Michigan partnerships need to file an annual report?
Michigan partnerships must file an annual report each year, by February 15th.
Can I file my Michigan partnership’s Certificate of Partnership online?
No, Michigan’s Certificate of Partnership must be filed by mail or in person at the Department of Licensing and Regulatory Affairs.
How long does it take to form a partnership in Michigan?
It typically takes 4-7 business days for Michigan to process a partnership Certificate of Partnership.
Do Michigan partnerships need to keep formal records of meetings and decisions?
Yes, partnerships should keep formal records of meetings and decisions to ensure liability protection and proper allocation of responsibilities.
What are the advantages of partnering in Michigan?
Benefits of partnering in Michigan include shared risk, shared management, balanced workloads, and tax flexibility.
What are the disadvantages of partnering in Michigan?
Disadvantages of partnering in Michigan include shared profits, personal liability for partner’s actions, disagreements over the business’s direction, and fewer financing options.
Can Michigan partnerships have employees?
Yes, general partnerships in Michigan can hire employees, but will need to register for state-level payroll taxes.
Can I dissolve my Michigan partnership at any time?
Yes, a partnership can be dissolved at any time by mutual agreement, by expiration of the partnership’s term, or by court order.
Do I need insurance for my Michigan partnership?
Insurance requirements vary depending on your specific business. Contact an insurance broker to determine what insurance is necessary for your partnership in Michigan.
Is there a fee to form a general partnership in Michigan?
Yes, there is a fee to register a partnership in Michigan, and the fee varies depending on the type of registration.
What are the advantages of forming a general partnership in Michigan?
One advantage of forming a general partnership in Michigan is that it is relatively easy and inexpensive compared to other types of business entities. Additionally, partners have equal rights and share profits and losses.
What are the disadvantages of forming a general partnership in Michigan?
One disadvantage of forming a general partnership in Michigan is that partners are personally liable for all of the debts and obligations of the partnership.
Can foreigners form a general partnership in Michigan?
Yes, foreigners can form a general partnership in Michigan, but they may have to go through additional steps to qualify to conduct business in the state.
What paperwork do I need to form a general partnership in Michigan?
To form a general partnership in Michigan, you need to file a certificate of partnership and designate a registered agent with the Michigan Department of Licensing and Regulatory Affairs.
How many partners do I need to form a general partnership in Michigan?
You need at least two partners to form a general partnership in Michigan.
What types of businesses can form a general partnership in Michigan?
Any type of business can form a general partnership in Michigan, as long as it meets the state’s registration requirements.
Can I change the name of a general partnership in Michigan?
Yes, you can change the name of a general partnership in Michigan by filing an application for an amendment to the certificate of partnership.
Do I have to renew my general partnership registration in Michigan?
No, general partnership registrations in Michigan do not expire.
Can I operate a general partnership in multiple states if I form it in Michigan?
Yes, but you will need to register your partnership as a foreign entity in any state where you conduct business.
How do I dissolve a general partnership in Michigan?
To dissolve a general partnership in Michigan, you need to file a certificate of dissolution with the Michigan Department of Licensing and Regulatory Affairs.
Can I form a general partnership with someone who lives in a different state than Michigan?
Yes, you can form a general partnership with someone who lives in a different state than Michigan, but you may need to qualify to conduct business in that state.
What is a registered agent and why do I need one for my general partnership in Michigan?
A registered agent is a person or entity appointed to receive legal documents on behalf of a business entity. You need a registered agent for your general partnership in Michigan to comply with state law.
Can I change the registered agent for my general partnership in Michigan?
Yes, you can change the registered agent for your general partnership in Michigan by filing a statement of change of registered office and/or registered agent with the Michigan Department of Licensing and Regulatory Affairs.
Are there any reporting requirements for general partnerships in Michigan?
No, there are no reporting requirements for general partnerships in Michigan.
Can a general partnership be sued in Michigan?
Yes, a general partnership can be sued in Michigan, and the partners are personally liable for all of the partnership’s debts and obligations.
What taxes do I need to pay as a general partnership in Michigan?
General partnerships in Michigan are not subject to state income tax. However, each partner is responsible for reporting their share of the partnership’s income on their individual income tax returns.
How do I obtain necessary licenses and permits to operate my general partnership in Michigan?
The licenses and permits required for your general partnership to operate in Michigan will depend on the type of business you are in. Contact the Michigan Department of Licensing and Regulatory Affairs for more information.
What is a partnership agreement?
A partnership agreement is a legal document that sets forth the rights, obligations, and responsibilities of the partners in a general partnership in Michigan.
Is a partnership agreement required for my general partnership in Michigan?
A partnership agreement is not required by law, but it is strongly recommended to establish clear procedures for decision-making and conflict resolution among partners.
Can a partner transfer their ownership interest in a general partnership in Michigan?
Yes, a partner can transfer their ownership interest in a general partnership in Michigan, but they must first obtain the consent of the remaining partners.
What if my partnership experiences financial difficulties in Michigan?
Partners are personally liable for all of the debts and obligations of a general partnership in Michigan, so it is important to have a plan in place to handle financial difficulties before they occur.
Do I need insurance for my general partnership in Michigan?
Obtaining insurance for your general partnership in Michigan is highly recommended, and can help protect partners from legal liability and financial losses.
How can I find more information about general partnerships in Michigan?
The Michigan Department of Licensing and Regulatory Affairs is a great resource for more information about general partnerships in Michigan, and you may also want to consult with a local business attorney.

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Conclusion

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