How to Create a General Partnership in New Jersey | A Complete Guide

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Create a General Partnership in New Jersey

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

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

Steps in Creating a General Partnership in New Jersey

What is General Partnership in New Jersey?

A general partnership in New Jersey 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 New Jersey Corporations or limited liability partnerships.

It is recommended that you consult to New Jersey 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 New Jersey 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
  • New Jersey 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 New Jersey

To create a general partnership in New Jersey, 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 New Jersey. 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 New Jersey 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 New Jersey with New Jersey Division of Revenue and Enterprise Services.

Filing a DBA in New Jersey has two methods, by mail and in person., which costs around $50. There is five years validity in renewing your DBA. 

In New Jersey, 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 New Jersey Division of Revenue and Enterprise Services 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 New Jersey. 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 New Jersey. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in New Jersey

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

In New Jersey, 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 New Jersey.

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 New Jersey 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 New Jersey, check out the Best Bank for New Jersey Small Business.

Pros and Cons of a General Partnership in New Jersey

In forming a general partnership in New Jersey, 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 New Jersey

  • 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 New Jersey

  • 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 New Jersey

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

Pay Your Taxes in New Jersey

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

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

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

FAQs

What is a general partnership in New Jersey?
A general partnership in New Jersey is an unincorporated business entity created by two or more people who agree to carry on a business for profit.
Do I need to register my general partnership in New Jersey?
Yes, you need to register your general partnership in New Jersey with the New Jersey Department of the Treasury.
How do I register my general partnership in New Jersey?
You can register your general partnership in New Jersey by filing a Certificate of Partnership with the New Jersey Department of the Treasury.
How much does it cost to register a general partnership in New Jersey?
It costs $125 to register a general partnership in New Jersey.
Do I need to file a separate tax return for my New Jersey general partnership?
No, you don’t need to file a separate tax return for your New Jersey general partnership. As a pass-through entity, the profits and losses of the partnership are included on the partners’ individual tax returns.
How many partners can a general partnership have in New Jersey?
A general partnership in New Jersey can have an unlimited number of partners.
Can a general partnership in New Jersey be operated under a different name?
Yes, a general partnership in New Jersey can operate under a different name as long as it registers the name with the New Jersey Department of the Treasury.
Can the partners in a New Jersey general partnership have different ownership percentages?
Yes, the partners in a New Jersey general partnership can have different ownership percentages.
What liability do I have as a partner in a New Jersey general partnership?
As a partner in a New Jersey general partnership, you have unlimited personal liability for the partnership’s debts and obligations.
Can I limit my personal liability as a partner in a New Jersey general partnership?
Yes, you can limit your personal liability as a partner in a New Jersey general partnership by forming a limited liability partnership.
Do I need to file an annual report for my New Jersey general partnership?
No, you don’t need to file an annual report for your New Jersey general partnership.
Can a partner be expelled from a New Jersey general partnership?
Yes, a partner can be expelled from a New Jersey general partnership if the partnership agreement allows for it.
Can a New Jersey general partnership be dissolved?
Yes, a New Jersey general partnership can be dissolved if any one of the partners gives notice of their intention to dissolve the partnership.
How are the profits and losses of a New Jersey general partnership shared among the partners?
The profits and losses of a New Jersey general partnership are shared among the partners according to their ownership percentages.
Can a New Jersey general partnership be converted into a different business entity?
Yes, a New Jersey general partnership can be converted into a different business entity, such as a limited liability company or a corporation.
Do I need a written partnership agreement to form a New Jersey general partnership?
No, you don’t need a written partnership agreement to form a New Jersey general partnership, but it is recommended that you have one.
Where can I get a partnership agreement for my New Jersey general partnership?
You can get a partnership agreement for your New Jersey general partnership from a business attorney.
Can non-residents be partners in a New Jersey general partnership?
Yes, non-residents can be partners in a New Jersey general partnership.
Can I use the partnership agreement for my New Jersey general partnership in other states?
No, you can’t use the partnership agreement for your New Jersey general partnership in other states. Each state has its own laws and regulations for partnerships.
Do I need a business license to operate a New Jersey general partnership?
It depends on the type of business you operate. Certain types of businesses require a business license in New Jersey.
How do I pay taxes as a partner in a New Jersey general partnership?
Each partner in a New Jersey general partnership pays taxes on their share of the partnership’s profits and losses on their individual tax returns.
Can I contribute services instead of money to my New Jersey general partnership?
Yes, you can contribute services instead of money to your New Jersey general partnership.
Can a New Jersey general partnership own assets?
Yes, a New Jersey general partnership can own assets.
Can a New Jersey general partnership have employees?
Yes, a New Jersey general partnership can have employees.
Can a New Jersey general partnership take out loans?
Yes, a New Jersey general partnership can take out loans, but the partners will be personally liable for the loan.
Can a New Jersey general partnership own real estate?
Yes, a New Jersey general partnership can own real estate.
Does a New Jersey general partnership pay state taxes?
No, a New Jersey general partnership doesn’t pay state taxes. The profits and losses of the partnership are included on the partners’ individual tax returns.
Can a New Jersey general partnership be sued?
Yes, a New Jersey general partnership can be sued as a separate legal entity.
Can I transfer my ownership share of a New Jersey general partnership?
Yes, you can transfer your ownership share of a New Jersey general partnership as long as the partnership agreement allows for it.
How do I form a general partnership in New Jersey?
To create a general partnership in New Jersey, you must file a “Certificate of Partnership” with the New Jersey Secretary of State.
How much does it cost to create a general partnership in New Jersey?
Filing a “Certificate of Partnership” with the New Jersey Secretary of State costs $125.
Can anyone form a general partnership in New Jersey?
No, only individuals over the age of 18 are allowed to form a general partnership in New Jersey.
What do I need to include in my “Certificate of Partnership” in New Jersey?
You must include the name of the partnership, the service of process address, the address of the partnership, and the name and address of each partner.
How many partners do I need to form a general partnership in New Jersey?
You only need two or more partners to form a general partnership in New Jersey.
Is my personal liability limited in a general partnership in New Jersey?
No, as a partner in a New Jersey general partnership, your personal liability is not limited.
Is a business license required to form a general partnership in New Jersey?
You do not need a business license to form a general partnership in New Jersey, but you will need to register for taxes and obtain permits.
Do I need to register my general partnership with the state of New Jersey before doing business?
Yes, you must register your partnership with the New Jersey Secretary of State before conducting business.
Can I register a general partnership online in New Jersey?
Yes, you can register a general partnership online through the New Jersey Business Gateway Service.
How long does it take to approve a “Certificate of Partnership” in New Jersey?
“Certificate of Partnership” filings are usually approved within five business days in New Jersey.
What happens if my “Certificate of Partnership” is rejected by the state of New Jersey?
If your “Certificate of Partnership” is rejected, you will receive a letter from the state detailing what needs to be fixed. You may have to re-submit the filing.
Can a non-resident of New Jersey form a general partnership in the state?
Yes, non-residents can form a general partnership in New Jersey.
What percentage of ownership do I need to be considered a partner in a general partnership in New Jersey?
There are no set ownership requirements for being considered a partner in a New Jersey general partnership.
Can a minor be a partner in a New Jersey general partnership?
No, minors cannot be partners in a New Jersey general partnership.
Can a corporation be a partner in a New Jersey general partnership?
No, corporations cannot be partners in a New Jersey general partnership.
Do I need to have a written partnership agreement in New Jersey?
While not required, it is strongly recommended that you have a written partnership agreement in New Jersey.
What should be included in a partnership agreement for a New Jersey general partnership?
Partnership agreements should include each partner’s responsibilities and rights, operating processes for decision-making, and dissolution terms.
Are there any exemptions from obtaining permits for a general partnership in New Jersey?
Yes, certain businesses are exempt from obtaining permits in New Jersey; however, partners must still register for taxes.
Does New Jersey offer any partnership designation options, such as limited partnership or limited liability partnership?
Yes, New Jersey offers both limited partnership and limited liability partnership options.
Can I add partners to my New Jersey general partnership later on?
Yes, you can add partners as needed to your general partnership in New Jersey.
How do I dissolve a general partnership in New Jersey?
To dissolve a general partnership in New Jersey, you must file a “Certificate of Cancellation” with the New Jersey Secretary of State and begin the winding-down processes.
Can a partner transfer their interest in the general partnership in New Jersey to someone else?
Yes, partners can transfer their interests in the New Jersey general partnership, as long as the transfer is in accordance with the partnership agreement.
Do all partners have an equal say in decision-making in a New Jersey general partnership?
No, each partnership agreement will detail how decisions will be made within the partnership. It is up to the individuals involved to determine how they want to structure the decision-making process.
Are partnerships taxed as a separate entity in New Jersey?
No, partnerships in New Jersey are not taxed as separate entities. Instead, taxes are passed through to the individual partners.
Can I open a business bank account for my New Jersey general partnership?
Yes, you can open a business bank account for your general partnership in New Jersey.
Will I need to obtain a business identification number for my general partnership in New Jersey?
Every general partnership in New Jersey will need to obtain an Employment Identification Number (EIN).
Can a person be a partner in more than one New Jersey general partnership?
Yes, a person can be a partner in multiple New Jersey general partnerships.
What happens if a partner in a New Jersey general partnership dies?
If a partner in a New Jersey general partnership dies, the existing partnership agreement will determine the next steps for the partnership. Depending on the agreement or state law, remaining partners may need to vote on next steps or handle the distribution of the deceased partner’s interests.
Can a partnership operate under a different name than the partners in New Jersey?
Yes, you can operate a New Jersey general partnership under a fictitious name, also called a DBA (doing business as), but the name must be registered with the state of New Jersey.

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Conclusion

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