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

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
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Create a General Partnership in Virginia

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

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

What is General Partnership in Virginia?

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

It is recommended that you consult to Virginia 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 Virginia rather than a general partnership.

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Example of a General Partnership

An example of a general partnership could be a small marketing agency created by two friends, Shane and Jane. Shane has a background in graphic design, while Jane has experience in digital marketing strategies. They decide to join forces and create a marketing agency that offers clients a combination of their expertise.

Shane and Jane contribute their skills, resources, and capital to start the business. They agree to share the profits, losses, and management responsibilities. Both partners actively participate in the agency’s day-to-day operations, making decisions and working with clients collaboratively.

In this general partnership, Shane and Jane have unlimited personal liability for any debts or obligations incurred by their marketing agency. If the agency faced financial difficulties, both partners’ personal assets could be used to cover the debts. However, the simplicity and flexibility of the general partnership structure allow them to manage and grow their business together easily.

Individuals looking to collaborate and numerous service providers have chosen general partnerships as their preferred business entity. That’s frequently because of its simple design, low price, and simplicity of setup. Some general partnership examples include: 

  • Providing Professional Services (architectural firms, medical clinics, etc.)
  • Selling goods at retail 
  • Opening a restaurant
  • Virginia 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 Virginia

To create a general partnership in Virginia, 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 Virginia. 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 Virginia 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 Virginia with Virginia State Corporation Commission.

Filing a DBA in Virginia has three methods, online, by mail, and in person filing., which costs around $10. There is Indefinite validity in renewing your DBA. 

In Virginia, 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 Virginia State Corporation Commission 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 Virginia. 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 Virginia. The default laws might not be appropriate for your requirements.

Step 3: Request an EIN in Virginia

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

In Virginia, 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 Virginia.

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

Pros and Cons of a General Partnership in Virginia

In forming a general partnership in Virginia, 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 Virginia

  • 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 Virginia

  • 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 Virginia

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

Pay Your Taxes in Virginia

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

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

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

FAQs

What is a general partnership in Virginia?
A general partnership in Virginia is a business structure in which two or more individuals share the profits, losses, and management responsibilities of the business.
Do I need a written agreement to form a general partnership in Virginia?
No, you do not need a written agreement to form a general partnership, but it is highly recommended to have one to avoid disputes.
Is a general partnership taxed in Virginia?
No, a general partnership in Virginia is not taxed at the entity level. The partners report their share of profits and losses on their personal tax returns.
How do I register my general partnership in Virginia?
You must file a certificate of partnership with the Virginia State Corporation Commission and pay the associated filing fee.
Do I need to obtain any licenses or permits to operate a general partnership in Virginia?
It depends on the type of business you are operating. Some businesses require licenses or permits at the state or local level.
Can a general partnership in Virginia be formed between non-residents?
Yes, a general partnership in Virginia can be formed between residents and non-residents.
Are there any residency requirements for partners in a Virginia general partnership?
No, Virginia does not have any residency requirements for partners in a general partnership.
Do Virginia partnerships have limited liability?
No, partners in a general partnership in Virginia do not have limited liability. Each partner is personally responsible for the debts and obligations of the business.
Can a general partnership in Virginia be sued?
Yes, a general partnership in Virginia can be sued.
Can a partner in a general partnership bind the other partners to a contract in Virginia?
Yes, each partner in a general partnership in Virginia has the authority to bind the other partners to a contract.
How can a partner leave or withdraw from a Virginia general partnership?
A partner can leave or withdraw from a general partnership in Virginia by giving notice to the other partners.
Can a Virginia general partnership own property?
Yes, a general partnership in Virginia can own property.
Can a partner transfer their interest in a Virginia general partnership to someone else?
Yes, a partner can transfer their interest in a Virginia general partnership to someone else.
Is there a limit to the number of partners that can be in a Virginia general partnership?
No, there is no limit to the number of partners in a general partnership in Virginia.
Can a Virginia general partnership convert to another business entity?
Yes, a general partnership in Virginia can be converted into a different business entity.
Can a general partnership in Virginia hire employees?
Yes, a general partnership in Virginia can hire employees.
Are there any annual reporting requirements for Virginia general partnerships?
Yes, general partnerships in Virginia must file an annual report with the State Corporation Commission and pay the associated fees.
What happens to a Virginia general partnership if a partner dies?
When a partner dies, their interest in the partnership is transferred to their estate.
Can a Virginia general partnership have a DBA (doing business as) name?
Yes, a general partnership in Virginia can have a DBA name.
Is there a minimum age requirement for forming a Virginia general partnership?
No, there is no minimum age requirement for forming a general partnership in Virginia.
Can a Virginia general partnership be dissolved by one partner?
No, a general partnership in Virginia can only be dissolved by agreement of all partners.
How is a Virginia general partnership taxed?
A general partnership in Virginia is not taxed at the entity level. The partners report their share of profits and losses on their personal tax returns.
Can a Virginia general partnership be sued for personal debts of a partner?
Yes, a Virginia general partnership can be sued for personal debts of a partner.
How are profits and losses allocated among partners in a Virginia general partnership?
Profits and losses are typically allocated based on each partner’s percentage of ownership.
Can a Virginia general partnership distribute profits to partners?
Yes, a general partnership in Virginia can distribute profits to partners.
Can a partner in a Virginia general partnership be an LLC?
Yes, a partner in a Virginia general partnership can be an LLC.
Does Virginia have a statute that governs general partnerships?
Yes, Virginia’s general partnership statute can be found in Title 50 of the Virginia Code.
Do I need a lawyer to form a Virginia general partnership?
No, you do not need a lawyer to form a Virginia general partnership, but it is recommended to seek legal advice for complex matters.
Can a Virginia general partnership convert to a corporation?
Yes, a general partnership in Virginia can be converted into a corporation.
How many partners are required for a general partnership in Virginia?
At least two partners are required for a general partnership in Virginia.
How do I create a general partnership in Virginia?
To create a general partnership in Virginia, you must file a partnership agreement with the state.
What is a partnership agreement in Virginia?
A partnership agreement is a written agreement between partners that governs the terms of their partnership.
How do I get a partnership agreement in Virginia?
You can get a partnership agreement in Virginia by drafting one yourself or hiring an attorney to help you create one.
Is a partnership agreement mandatory in Virginia?
No, a partnership agreement is not mandatory in Virginia; however, it is strongly recommended to avoid future disputes.
What information does a partnership agreement need to include in Virginia?
A partnership agreement in Virginia need to include business name, purpose, partner contributions, shares, management ratio, profit and loss ratio, termination period, and dissolution clauses.
What should I consider when creating a partnership agreement in Virginia?
Some factors to consider when creating a partnership agreement in Virginia are
Do I need to register my general partnership in Virginia?
No, registration of a general partnership in Virginia is not mandatory.
How do I name my general partnership in Virginia?
To name your general partnership in Virginia, you need to make sure that name is not in use of someone else. You can search the name availability on the Virginia State Corporation Commission’s (SCC) website.
Can I change my general partnership name after forming it in Virginia?
Yes, you can change the name of your general partnership in Virginia by filing a Certificate of Amendment with the SCC.
How much does it cost to file a partnership agreement in Virginia?
The filing fees to register a partnership in Virginia change occasionally. Currently, it costs $100 for filing it.
How do I dissolve my general partnership in Virginia?
To dissolve your general partnership in Virginia, you and your partner need to create a written agreement together or creating documents through highly qualified attorneys.
What taxes do I need to pay as a general partnership in Virginia?
As a general partnership in Virginia, you must pay state and federal income taxes, as well as self-employment taxes.
How do I apply for a partnership tax ID number in Virginia?
You can apply for a partnership tax ID number in Virginia by filling out Form SS-4 with the Internal Revenue Service (IRS).
Can I add or remove partners from my general partnership in Virginia?
Yes, you can add or remove partners from your general partnership in Virginia, however, you need to need to update and file the proper documents with the SCC.
Can I transfer my partnership ownership to someone else in Virginia?
Yes, you can transfer your partnership ownership to others, but both need to discuss it. And prepare a new Partnership Agreement document.
What liability am I exposed to as a partner in a Virginia general partnership?
Partners of Virginia general partnerships are exposed to the liabilities of the business, and risking personal assets.
How do I protect myself from personal liability as a partner in Virginia?
To protect yourself from personal liability, you can structure your partnership as an LLC.
Can I have multiple businesses under my general partnership in Virginia?
Yes, you can have multiple businesses under your general partnership in Virginia, however you’d be sharing the profit and loss together among the partners.
How do I reopen my dissolved general partnership in Virginia?
You can’t reopen dissolved the general partnership in Virginia, but you can form a new one with the same partner if they’re agree with you.
Who should I contact if I have more questions about general partnership formation in Virginia?
You can contact the Virginia State Corporation Commission (SCC) to obtain more information about forming your partnership in Virginia.
What are the advantages of forming a general partnership in Virginia?
Some of the advantages of forming a general partnership in Virginia are
What are the disadvantages of forming a general partnership in Virginia?
Some of the disadvantages of forming a general partnership in Virginia are
How much time does it take to form a general partnership in Virginia?
It could take up to thirty minutes for applying and uploading the Partnership Agreement and fee when things go smoothly.
Would it be legally binding if I write down the partnership agreement by myself in Virginia?
Yes, if you fulfill all requirements as per Virginia law, set on a written agreement, you can create your own partnership agreement without hiring any attorney.
Do I need to keep track of books and records for my partnership agreement in Virginia?
Yes, it is recommended by SCC to keep official records for the partners, which could corroborate status, shares, profit and loss distributions, for protecting partners from any disputes within or with outside party.
What happens if one partner decides to leave the general partnership in Virginia?
Each case is different , a partnership categorized under the partnership agreement rules and both partners can come up with new terms at should dictate responsibilities, compensation, and revenue —or dissolve the business if either party isn’t happy anymore.
How do I ensure my general partnership is compliant with the law in Virginia?
To ensure compliance, you can hire an attorney to establish automated an file filings, making sure all government, and sector specific compliances are fulfilled timely.

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Conclusion

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