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

by
Create a General Partnership in Minnesota

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

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

Steps in Creating a General Partnership in Minnesota

What is General Partnership in Minnesota?

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

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

To create a general partnership in Minnesota, 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 Minnesota. 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 Minnesota 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 Minnesota with Minnesota Secretary of State.

Filing a DBA in Minnesota has three methods, online, by mail, and in person filing., which costs around $50 for online filing and $30 for offline filing. There is one year validity in renewing your DBA. 

In Minnesota, 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 1 year. You must file a name reservation application in the Minnesota Secretary of State to keep the name. 

Step 2: Make a Partnership Agreement

After you have chosen a business name for your general partnership, the next step would be making a partnership agreement in Minnesota. 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 Minnesota. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Minnesota

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

In Minnesota, 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 Minnesota.

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

Pros and Cons of a General Partnership in Minnesota

In forming a general partnership in Minnesota, 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 Minnesota

  • 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 Minnesota

  • 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 Minnesota

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

Pay Your Taxes in Minnesota

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

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

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

FAQs

What is a general partnership in Minnesota?
A general partnership in Minnesota is a business structure where two or more people agree to go into business together.
What are the requirements to start a general partnership in Minnesota?
You need to file a Certificate of Assumed Name with the Secretary of State in Minnesota.
What’s the cost of filing a Certificate of Assumed Name in Minnesota?
It varies based on the county where the partnership will operate, but expect to pay between $40 and $80.
Does the State of Minnesota require a written agreement to form a general partnership?
No, a written agreement is not required, but we strongly recommend that all partners work with a lawyer to create one.
If a written agreement is optional, what should it include?
A written agreement should outline each partner’s responsibilities, rights, and their share of partnership gains and losses.
Can a general partnership in Minnesota have only one partner?
No, a “partnership” implies that there’s more than one person involved.
What are the tax implications of a general partnership in Minnesota?
Partnerships do not pay income tax separate from the partners, instead, the profit or loss is passed through to individual partners.
Is a business license required to run a general partnership in Minnesota?
It depends on where the business is being operated. Some cities in Minnesota may require businesses to have a license.
How soon should we register for a general partnership in Minnesota?
The Certificate of Assumed Name needs to be filed as soon as possible if business has already started.
What happens if we don’t register the partnership in Minnesota?
If you don’t register a partnership, it leaves the partners personally liable for all expenses and debts owed to the business.
How long does it take to get a Certificate of Assumed Name in Minnesota?
It usually takes only a few days to process.
Are there any annual reports that need to be filed to maintain the general partnership in Minnesota?
No, there are no annual reports alongside regulations on Partnership Law.
Is there a limit to how many partners you can have in a general partnership in Minnesota?
No, there isn’t a legal limit- But most partnerships attempt a number that makes sense for smooth functioning.
Is it legal to change my business name as a general partnership in Minnesota?
Yes, as a partnership, businesses can change the name of their enterprise through certain legal or administrative ways.
Can my general partnership agreement in Minnesota lasted for a predetermined amount of time?
It could, although most partnerships are set up to continue indefinitely unless otherwise stated.
Must partners be residents of Minnesota to form a partnership in the state?
Neither the state nor the federal sets any residency requirements governing partners’ intrastate locations.
Who can act as a general partner in Minnesota?
Anyone can act as a general partner.
When should a partnership agreement be written?
A partnership agreement should be written immediately, preferably before the business starts operating.
Who are the primary decision-makers in a general partnership in Minnesota?
Each partner must determine their role in the business. Partners also have their interests at paramount consideration.
Can liability protection be revoked within a general partnership in Minnesota?
At any time, partners’ personal assets may be used to cover the debts of the business.
Is resale permit required to sell merchandise as a general partnership in Minnesota?
A general trading licenses is exclusively different from a resale permit as a matter of getting permitted to sell merchandise in Minnesota.
Is there a combined report registration when forming an LLC general partnership in Minnesota?
No, there’s not a combined report registration process but there are numerous forms and processes to adhere to while registering as a liability partnership.
Can I be personally sued if I’m part of a general partnership in Minnesota?
Yes, since most partnerships are not separate legal entities, the partners of the company can be sued personally.
Does a general partnership require a business bank account in Minnesota?
Although opening a business bank account is not required, it’s a reasonable way to separate your business finances from personal finances.
Can I still get workers’ compensation for employees of a general partnership in Minnesota?
Yes, workers like all other agents are covered through their respective business’s workers’ compensation department.
Do I need insurance for my general partnership in Minnesota?
The law doesn’t bind establishment of professional liability insurance in Minnesota, some insurance coverage make a great deal of sense.
What dissolution process is used for a general partnership in Minnesota if the partners decide to go their separate ways?
Partnership ends upon dissociation, however, each partner shares the settlement to end the business operations.
Once my Certificate of Assumed Name is approved, am I free to do business in Minnesota?
No, there are a variety of regulation to account for operational activties such as taxes, proprietor applications, zoning permits and many more.
What is a general partnership?
A general partnership is a type of business structure in which two or more people share the management, profits, and liability of a business.
How do I form a general partnership in Minnesota?
To form a general partnership in Minnesota you must complete and file a Partnership Agreement with the Secretary of State’s office.
Do I need a lawyer to create a general partnership in Minnesota?
No, it’s not required to have a lawyer to create a general partnership in Minnesota, but it’s recommended to seek legal counsel before filing legal documents.
How many partners can be in a general partnership in Minnesota?
There is no limit to the number of partners that can be involved in a general partnership in Minnesota.
What is a Partnership Agreement in Minnesota?
A Partnership Agreement in Minnesota is a legal agreement that outlines the terms and conditions of the partnership.
What should be included in a Partnership Agreement in Minnesota?
A Partnership Agreement in Minnesota should include the names of the partners, the share of profits and losses, the management structure, and the resolution of disputes.
Do I have to register my general partnership in Minnesota?
In Minnesota, there is no legal requirement to register your general partnership. However, you may choose to register your partnership with the Minnesota Secretary of State.
What is the role of each partner in a general partnership in Minnesota?
Each partner in a general partnership in Minnesota shares equally in the profits and losses of the business. Each partner is also responsible for the management and operation of the business.
Are there any taxes I need to be aware of when creating a general partnership in Minnesota?
Yes, as a general partnership in Minnesota, you will need to pay both state and federal income taxes, as well as any sales taxes.
Can I change the terms of my Partnership Agreement in Minnesota?
Yes, you can change the terms of your Partnership Agreement in Minnesota by drafting an amendment and filing it with the Secretary of State’s office.
How long does a Minnesota general partnership last?
A Minnesota general partnership is ongoing until all the partners agree to dissolve the partnership.
Can I dissolve a Minnesota general partnership at any time?
Yes, you can dissolve your Minnesota general partnership at any time with the unanimous consent of all partners.
Can I have a general partnership and still be liable for its debts in Minnesota?
Yes, each partner in a general partnership in Minnesota is personally liable for the debts and obligations of the partnership.
Do I need a DBA to operate a general partnership in Minnesota?
No DBA is required in Minnesota to operate a general partnership. However, you may choose to file an Assumed Name certificate with the Minnesota Secretary of State.
Can I share ownership in a property as part of a Minnesota general partnership?
Yes, a Minnesota general partnership can own property and you can share ownership in the partnership.
Can I open a bank account for my Minnesota general partnership?
Yes, a Minnesota general partnership can open a bank account in the partnership name, as well as any business name registered with the state.
How do I add a new partner to a Minnesota general partnership?
Adding a new partner to a Minnesota general partnership requires the unanimous consent of all existing partners and an amendment to the Partnership Agreement.
Is it legal to operate a general partnership without a Partnership Agreement in Minnesota?
It is legal to operate a general partnership without a Partnership Agreement in Minnesota. However, it is not recommended and it may lead to disputes and disagreements.
Can I have a silent partner in a Minnesota general partnership?
Yes, a silent partner can participate in a Minnesota general partnership but must be specifically noted in the Partnership Agreement and often provides only investments.
Can I have a different contribution of capital from a partner in a Minnesota general partnership?
Yes, each partner in a Minnesota general partnership can contribute a different amount of capital to the partnership.
How can I sue or be sued on behalf of a Minnesota general partnership?
You can sue or be sued on behalf of a Minnesota general partnership by filing a lawsuit in the district court of Minnesota.
Do I need a business license to operate a general partnership in Minnesota?
Yes, depending on the nature of the partnership business, you may need a business license or relevant permits from the state or local municipality in Minnesota.
How often do I need to file taxes for a Minnesota general partnership?
In Minnesota, general partnerships are pass-through entities, meaning that partners report on their own individual tax returns, and there is not required to file a separate partnership tax return.
Do I need to file for a certificate of good standing for a Minnesota general partnership?
Filing for a certificate of good standing in Minnesota is not common for a partnership business; however, it may help demonstrate the good standing of the partnership before investors or creditors.
Can my Minnesota general partnership open a branch office outside of Minnesota?
Yes, a Minnesota general partnership can open a branch office in another state or location with following rules and regulation.
Can non-residents of Minnesota be part of a general partnership in Minnesota?
Yes, non-residents can be part of a Minnesota general partnership, but they may need to comply with particular registration and filing requirements with Minnesota Secretary of State.
Can I make changes to my Minnesota Partnership Agreement without notifying the authorities?
No, you will need to file the amendment with the Minnesota secretary of State and go through related legal formalities and fees.
How to selected a partnership name for my partnership business in Minnesota?
You must know that the Minnesota Secretary of State requires each general partnership’s name to be different and assigned a unique four-letter “identifier,” and should to be researched so that it is not violating any other registered trademark or existing business name in the state of Minnesota.
What benefits does Minnesota general partnership get over incorporations or limited liability partnership (LLP)?
The General Partnership provides Great degrees of easiness in the registration process and fewer Statutory requirements than incorporation, but liability coverage is that it falls in individual Partner places unlike that of Limited Liability Partnerships.

Also Read

Conclusion

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

Leave a Comment