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

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Create a General Partnership in Tennessee

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

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

Steps in Creating a General Partnership in Tennessee

What is General Partnership in Tennessee?

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

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

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

Filing a DBA in Tennessee has two methods, by mail and in person., which costs around Varies by county. There is five years validity in renewing your DBA. 

In Tennessee, 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 4 months. You must file a name reservation application in the Tennessee 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 Tennessee. 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 Tennessee. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Tennessee

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

In Tennessee, 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 Tennessee.

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

Pros and Cons of a General Partnership in Tennessee

In forming a general partnership in Tennessee, 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 Tennessee

  • 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 Tennessee

  • 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 Tennessee

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

Pay Your Taxes in Tennessee

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

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

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

FAQs

What is a general partnership in Tennessee?
A general partnership is a type of business entity formed by two or more individuals who agree to share profits and losses.
How do I form a general partnership in Tennessee?
To form a general partnership in Tennessee, you need to file a partnership agreement with the Tennessee Secretary of State’s Office.
Do I need a lawyer to form a general partnership in Tennessee?
While it is not required to have a lawyer to form a general partnership in Tennessee, it may be beneficial to have legal guidance.
How do I choose a business name for my partnership in Tennessee?
The business name for your partnership in Tennessee must be distinguishable from other businesses in the state.
How do I register my business name in Tennessee?
You can register your business name in Tennessee by filing a Trade Name Application with the Secretary of State.
What tax obligations does a general partnership have in Tennessee?
A general partnership in Tennessee is required to file annual tax returns and pay taxes on its income.
How are profits and losses allocated in a general partnership in Tennessee?
Profits and losses are allocated in a general partnership in Tennessee based on the partnership agreement.
How is a general partnership in Tennessee managed?
A general partnership in Tennessee is managed by its partners, who make decisions through a vote.
Do partners in a general partnership in Tennessee have limited liability?
No, partners in a general partnership in Tennessee have unlimited liability for the partnership’s debts and obligations.
Can a general partnership in Tennessee own property?
Yes, a general partnership in Tennessee can own property.
Can a general partnership in Tennessee be sued?
Yes, a general partnership in Tennessee can be sued.
How is income taxed for partners in a general partnership in Tennessee?
Income from a general partnership in Tennessee is taxed as personal income for the partners.
What is the minimum number of partners required to form a general partnership in Tennessee?
There is no minimum number of partners required to form a general partnership in Tennessee.
Can a non-resident of Tennessee be a partner in a general partnership in Tennessee?
Yes, a non-resident of Tennessee can be a partner in a general partnership in Tennessee.
Can a minor be a partner in a general partnership in Tennessee?
Yes, a minor can be a partner in a general partnership in Tennessee, but they may not have full legal rights under the partnership agreement.
Can a partnership voluntarily dissolve in Tennessee?
Yes, a partnership can voluntarily dissolve in Tennessee, as long as the partners follow the dissolution procedures outlined in the partnership agreement.
Can a third-party terminate a general partnership in Tennessee?
Yes, a third-party can terminate a general partnership in Tennessee under certain circumstances, such as fraud or illegal activity.
Are there any annual filing requirements for general partnerships in Tennesse?
No, there are no annual filing requirements for general partnerships in Tennessee.
Can a general partnership in Tennessee change its business name?
Yes, a general partnership in Tennessee can change its business name by filing a Certificate of Amendment with the Secretary of State.
Can a general partnership in Tennessee be converted to a different entity type?
Yes, a general partnership in Tennessee can be converted to a different entity type, such as a limited liability company (LLC) or a corporation.
Can a general partnership in Tennessee have employees?
Yes, a general partnership in Tennessee can have employees.
Do all partners in a general partnership in Tennessee need to be involved in management?
No, not all partners in a general partnership in Tennessee need to be involved in management, as long as the partnership agreement allows for a managing partner or group of partners.
Do the partners in a general partnership in Tennessee need to contribute equity?
No, the partners in a general partnership in Tennessee are not required to contribute equity, but it may be outlined in the partnership agreement.
Can a partner in a general partnership in Tennessee transfer their ownership interest to someone else?
Yes, partners in a general partnership in Tennessee can transfer their ownership interest, but it may be subject to certain conditions outlined in the partnership agreement.
What happens to a partner’s ownership interest if they die or become incapacitated in Tennessee?
The partnership agreement should outline what happens to a partner’s ownership interest if they die or become incapacitated in Tennessee.
Do partners in a general partnership in Tennessee have a fiduciary duty to each other?
Yes, partners in a general partnership in Tennessee have a fiduciary duty to act in the best interest of the partnership and each other.
Can a general partnership in Tennessee have bank accounts?
Yes, a general partnership in Tennessee can have bank accounts.
Do partners in a general partnership in Tennessee need to pay self-employment taxes?
Yes, partners in a general partnership in Tennessee are considered self-employed and need to pay self-employment taxes.
Is a Partnership Agreement required in Tennessee to form a general partnership?
Yes, like all other states, Tennessee requires the submission of a Partnership Agreement before a general partnership can be formed.
What are the advantages of forming a general partnership in Tennessee?
Some advantages of forming a general partnership in Tennessee include sharing the financial burden and combining skills to run the business.
What are the disadvantages of forming a general partnership in Tennessee?
Some of the downsides of forming a general partnership in Tennessee are unlimited liability and potential disagreements between partners.
Can a general partnership in Tennessee have only one owner?
No, a general partnership in Tennessee requires a minimum of two partners.
Do partners in a Tennessee general partnership share equal liabilities?
Yes, partners in a Tennessee general partnership share equal liabilities, unless the Partnership Agreement specifies otherwise.
Can a general partnership in Tennessee be managed by the partners or one partner?
General partnerships in Tennessee are typically managed by all partners, but the Partnership Agreement may allow for one partner to manage the business.
How are taxes handled for a Tennessee general partnership?
In Tennessee, a general partnership does not pay taxes; instead, partners report their share of profits and losses on their individual tax returns.
Are there any naming requirements for a Tennessee general partnership?
Yes, a Tennessee general partnership’s name must contain the words “limited partnership” or “LP.”
How do I register a trademark for my general partnership in Tennessee?
To register a trademark in Tennessee, you will need to complete a registration application with Tennessee State Government Intellectual Property Division.
Is there an age limit for forming a general partnership in Tennessee?
No, there is no age limit for forming a general partnership in Tennessee, allowing companies to employ minors as consultants if they choose.
Can a Tennessee general partnership branch out to different states?
Yes, a Tennessee general partnership can expand to other states by following the regulations for foreign qualifications of states they operate in.
Are there annual reports or fees for a Tennessee general partnership?
Yes, general partnerships in Tennessee have to annually file with the Tennessee Secretary of State, pay a filing fee, and meet regular hours of operation.
Can I add new partners to my Tennessee general partnership after registering?
Yes, new partners can be added to the Tennessee general partnership after registration. Any new members help update
Are Tennessee general partnership records open for the public?
Yes, records for Tennessee general partnerships are available for public review through the Secretary of State’s ‘Business Search’ portal.
What happens if a partner leaves the Tennessee general partnership?
A partner leaving the Tennessee general partnership may dissolve the partnership, or the partnership may continue informed by legal structures in place.
What protection do taxpayers have as stakeholders in Tennessee general partnership businesses?
Partnerships in Tennessee offer core legal protections such as shared risks by tax payers financial risks dispersed through multiple small owners.
Can I ask my attorney to draw up a Partnership Agreement in Tennessee?
Yes, most attorneys in Tennessee take part in drawing up a Partnership Agreement for entrepreneurs.
Is there a cost for Partnership Agreement filing in Tennessee?
Yes, a filing fee of $50 is charged for Partnership Agreements in Tennessee.
Is insurance required by Tennessee general partnerships before they can start operating?
Insurance isn’t mandatory but recommended that general partnerships pursue a liability insurance for their protection in case of business and/or cover overlaps.
What is the deadline for Tennessee general partnership’s annual filings with the Secretary of State’s office?
The deadline for Tennessee general partnerships’ annual reports filing is normally six months or more, but specific questions should be fielded to legal professionals representing the managing members.
Can a partner in a Tennessee general partnership resign themselves or do they need to action removal in line with the Partnership Agreement?
Operators are permitted to leave partnership arrangements, as long as they set a departure date, follow the Partnership Agreement withdrawal plan, or work with remaining members on permission to release an adult exiting ownership.
Does a Tennessee general partnership have predetermined governance options for initiatives hoping minimal backlash from the public to participate within?
Yes, the state of Tennessee invested time into its INvolveTN initiative, which encourages and facilitates partnerships from major conglomerates to foster unique civic initiatives recognized by State governmental institutions.
How formalized does a Tennessee general partnership’s Partnership Agreement need to be?
The wording of your written Partnership Agreement can be as structured or casual as the future collaborators desire, but all the rules or lack thereof both overseeing partners and business must be incorporated.
Beyond records of the Tennessee general partnership, are there any procedural aspects related to public disclosure requirements?
For legal oversight reasons for a general partnership in Tennessee to be transparent, records of your profits and taxes are mandated must be open source documentation that should inform regular certified receipts and financial considerations for the stakeholders in businesses.
Are there state resources to indicate statistics relating to general partnerships in Tennessee?
Yes, the Secretary of State’s website provides a portal for learning key firm statistics from past years inferred on how businesses operated within Tennessee, their founding amounts considering relative economic factors and consequential information about generating their successful pursuit of grants.
Are there limitations to the scope of operations a Tennessee general partnership can support?
General Partner types are known under the guise of ‘Unregistered Investment Companies’ protecting only a minor number of stipulations that limit deal maximums to $750000 and the minimums counting toward return premiums costs no less than $1000 per holder certification.

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Conclusion

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