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

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Create a General Partnership in Pennsylvania

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

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

Steps in Creating a General Partnership in Pennsylvania

What is General Partnership in Pennsylvania?

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

It is recommended that you consult to Pennsylvania 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 Pennsylvania 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: 

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 Pennsylvania

To create a general partnership in Pennsylvania, 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 Pennsylvania. 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 Pennsylvania 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 Pennsylvania with Pennsylvania Department of State.

Filing a DBA in Pennsylvania has two methods, by mail and in person., which costs around $70. There is Indefinite validity in renewing your DBA. 

In Pennsylvania, 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 Pennsylvania Department 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 Pennsylvania. 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 Pennsylvania. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Pennsylvania

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

In Pennsylvania, 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 Pennsylvania.

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

Pros and Cons of a General Partnership in Pennsylvania

In forming a general partnership in Pennsylvania, 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 Pennsylvania

  • 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 Pennsylvania

  • 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 Pennsylvania

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

Pay Your Taxes in Pennsylvania

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

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

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

FAQs

What is a general partnership?
A general partnership is a business structure where two or more individuals establish a business together and share profits, liability, and decision-making responsibilities.
How do I form a general partnership in Pennsylvania?
To form a general partnership in Pennsylvania, you need to file a Certificate of Formation with the Department of State.
What should be included in the Certificate of Formation for a general partnership in Pennsylvania?
The Certificate of Formation for a general partnership in Pennsylvania should include the names and addresses of all partners, the name of the partnership, and a statement indicating that the business is structured as a general partnership.
How much does it cost to form a general partnership in Pennsylvania?
It typically costs around $125 to file a Certificate of Formation for a general partnership in Pennsylvania.
Does Pennsylvania require me to have a registered agent to form a general partnership?
Yes, Pennsylvania requires that all partnerships appoint a registered agent to receive official mail and legal documents.
Who can serve as a registered agent for a general partnership in Pennsylvania?
Anyone who resides in Pennsylvania or a Pennsylvania-based business entity can serve as a registered agent for a general partnership in Pennsylvania.
Can I operate under a trade name as a general partnership in Pennsylvania?
Yes, you can operate under a trade name, also known as a fictitious name or Doing Business As (DBA), as a general partnership in Pennsylvania.
Do I need to obtain any licenses or permits to run a general partnership in Pennsylvania?
Yes, some partnerships may need to obtain specific licenses and permits depending on the nature of their business operations in Pennsylvania.
What is a partnership agreement, and do I need one in Pennsylvania?
A partnership agreement is a document that outlines the rights and responsibilities of each partner in a general partnership. It is not mandatory to have one, but it is highly recommended in Pennsylvania.
Can the terms of a partnership agreement be changed in Pennsylvania?
Yes, the partnership agreement can be amended, but all partners must agree to the changes.
Do I need to file any annual paperwork for my partnership in Pennsylvania?
No, Pennsylvania does not require partnerships to file annual paperwork with the state.
Can a partner be removed from a partnership in Pennsylvania?
Yes, a partner can be removed from a partnership if the terms specified in the partnership agreement for removal are followed.
Do partners have unlimited liability in a general partnership in Pennsylvania?
Yes, partners in a general partnership in Pennsylvania have unlimited liability.
Can non-US citizens legally form a general partnership in Pennsylvania?
Yes, as long as they follow the same requirements for registration as US citizens.
What happens if the business starts running into financial issues in a general partnership in Pennsylvania?
All partners share teh liability amongst themselves.
Is there a limit on how many partners can be in a general partnership in Pennsylvania?
No, There is no limit on the number of partners in a general partnership in Pennsylvania.
Can one partner own more of the business than the others in a general partnership in Pennsylvania?
Yes, partners can have different ownership percentages in a general partnership in Pennsylvania.
Do I need to register my general partnership for taxes with Pennsylvania?
No, Pennsylvania does not require general partnerships to register for taxes with the state.
Do general partnerships in Pennsylvania need to file a federal tax return?
No, general partnerships in Pennsylvania are pass-through entities, which means their profits and losses pass through to the partners’ individual tax returns.
Can a general partnership in Pennsylvania open a business bank account?
Yes, a general partnership in Pennsylvania can open a business bank account using the partnership’s Employer Identification Number (EIN).
Can a general partnership in Pennsylvania register for a sales tax permit?
Yes, if the partnership sells taxable goods or services in Pennsylvania, they must register for a sales tax permit.
Can partnerships in Pennsylvania take out loans?
Yes, partnerships in Pennsylvania can take out loans on the basis of all the general partners’ credit rating.
Is worker’s compensation insurance required in Pennsylvania for partnerships?
Workers’ compensation insurance in Pennsylvania is a must if it’s required by C.O.I’s.
Can partnerships be formed online in Pennsylvania?
Yes, The Department of State of Pennsylvania now accepts online document filings.
Can a registered agent resign from their position in a Pennsylvania general partnership?
Yes, but they must provide written notice to the partners and ensure that they have a plan in place to receive legal documents.
Can a Pennsylvania general partnership be converted to another business structure at a later time?
Yes, you may convert your general partnership to another business structure such as an LLC in Pennsylvania, but all partners must approve.
Can general partners be held liable for debts of the partnership in Pennsylvania?
Yes, general partners in a Pennsylvania general partnership can be held fully liable for debts of the partnership.
Do I need to file any state or federal compliance documents upon forming a general partnership in Pennsylvania?
No, while it’s advised to draft a partnership agreement, there is no requirement to file the agreement in Pennsylvania at the state or federal levels.
Where can I find information on how to create a general partnership in Pennsylvania?
You can find information on forming a general partnership in Pennsylvania at the Pennsylvania Department of State’s website or by consulting with a lawyer or business professional in Pennsylvania.
What are the requirements for forming a general partnership in Pennsylvania?
The requirements for forming a general partnership in Pennsylvania include having two or more partners engaged in a business for profit and filing a Certificate of Partnership with the Department of State.
Do I need to register my general partnership with the Pennsylvania Department of State?
Yes, you need to register your general partnership with the Pennsylvania Department of State by filing a Certificate of Partnership.
How much does it cost to register a general partnership in Pennsylvania?
The filing fee to register a general partnership in Pennsylvania is $125 as of 2021.
Is a Certificate of Partnership required for a general partnership to legally operate in Pennsylvania?
Yes, a Certificate of Partnership is required for a general partnership to legally operate in Pennsylvania.
Where do I file the Certificate of Partnership for my general partnership in Pennsylvania?
You can file the Certificate of Partnership for your general partnership in Pennsylvania with the Pennsylvania Department of State.
Can I file the Certificate of Partnership for my general partnership in Pennsylvania online?
Yes, you can file the Certificate of Partnership for your general partnership in Pennsylvania online through the Pennsylvania Department of State’s website.
How long does it take to file the Certificate of Partnership for a general partnership in Pennsylvania?
It takes approximately 5-7 business days for the Pennsylvania Department of State to process a Certificate of Partnership filing.
What information is required for the Certificate of Partnership for a general partnership in Pennsylvania?
The Certificate of Partnership for a general partnership in Pennsylvania requires the names and addresses of each partner, the name of the partnership, and the business address of the partnership.
Are there any ongoing requirements for a general partnership in Pennsylvania after it is formed?
Yes, there are ongoing requirements for a general partnership in Pennsylvania, including filing an annual registration with the Department of State and obtaining any necessary business licenses and permits.
What is the liability of partners in a general partnership in Pennsylvania?
Partners in a general partnership in Pennsylvania have unlimited liability for the partnership’s debts and obligations.
Can a general partnership in Pennsylvania have employees?
Yes, a general partnership in Pennsylvania can have employees, but it must comply with various federal and state regulations related to hiring employees.
How are profits and losses distributed in a general partnership in Pennsylvania?
Profits and losses in a general partnership in Pennsylvania are typically divided among the partners according to the partnership agreement.
What happens if a partner leaves or dies in a general partnership in Pennsylvania?
If a partner leaves or dies in a general partnership in Pennsylvania, the partnership may dissolve or continue with the remaining partners, depending on the terms of the partnership agreement.
Do general partnerships in Pennsylvania require annual meetings?
General partnerships in Pennsylvania are not required to hold annual meetings, but doing so may be beneficial for maintaining partner communication and managing partnership affairs.
Can a general partnership in Pennsylvania own property?
Yes, a general partnership in Pennsylvania can own property, but it is important to structure the partnership agreement to specify how property ownership and management will be handled.
Can general partnership in Pennsylvania change its name?
Yes, a general partnership in Pennsylvania can change its name by filing an amendment to its Certificate of Partnership with the Pennsylvania Department of State.
Are there any tax implications for a general partnership in Pennsylvania?
Yes, a general partnership in Pennsylvania is considered a pass-through entity for tax purposes, meaning that the profits and losses of the partnership are passed on to the partners, who must report them on their individual tax returns.
What happens if a general partnership defaults on a loan in Pennsylvania?
If a general partnership in Pennsylvania defaults on a loan, the partners are personally liable for the debt unless the partnership agreement specifies otherwise.
Can a general partnership in Pennsylvania file for bankruptcy?
Yes, a general partnership in Pennsylvania can file for bankruptcy under certain circumstances, but each partner is still personally liable for the partnership’s debts and obligations.
Can non-residents form a general partnership in Pennsylvania?
Yes, non-residents can form a general partnership in Pennsylvania, but they should consult with a lawyer to ensure compliance with state and federal laws.
Are general partnership agreements required in Pennsylvania?
General partnership agreements are not required in Pennsylvania, but they are highly recommended to specify how the partnership will be managed and potential scenarios that may arise.
Can the partners in a general partnership in Pennsylvania have different roles or responsibilities?
Yes, the partners in a general partnership in Pennsylvania can have different roles and responsibilities as long as they are specified in the partnership agreement.
Can a general partnership in Pennsylvania be converted to a corporation?
Yes, a general partnership in Pennsylvania can be converted to a corporation, but this process involves filing certain legal documents and fulfilling other requirements.
Can a sole proprietorship in Pennsylvania become a general partnership?
Yes, a sole proprietorship in Pennsylvania can become a general partnership by adding at least one additional partner and filing a Certificate of Partnership with the Pennsylvania Department of State.
Can a general partnership in Pennsylvania have a DBA (doing business as) name?
Yes, a general partnership in Pennsylvania can have a DBA name as long as it obtains the necessary business licenses and permits.
Can a general partnership in Pennsylvania be dissolved by one partner?
No, a general partnership in Pennsylvania cannot be dissolved by one partner without the consent of the other partners, unless the partnership agreement specifies otherwise.
Are there any limitations on the number of partners in a general partnership in Pennsylvania?
There are no limitations on the number of partners in a general partnership in Pennsylvania.
Can a foreign general partnership do business in Pennsylvania?
Yes, a foreign general partnership can do business in Pennsylvania, but it must register with the state and comply with state and federal laws and regulations.

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Conclusion

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