A general partnership is also a simple form of business organization and is created when two or more people engage in business to make a profit. A major detractor of this form of business is the fact that it provides no limited liability protection for personal assets of any partner. A general partnership need not be in writing, although having an agreement in writing is advisable. Although general partnerships can informally be created, all states have statutes addressing the concerns of general partnerships; similar to probate, these statutes come into play when issues are not addressed in the partnership agreement or any other written instrument pertaining to the partnership.
General partnerships are generally used with a small group of persons who want to conduct simple business.
The partners share equally in the profit and losses of the general partnership. The partners also equally share in the management responsibility in the day-to-day affairs of the general partnership. Moreover, each partner has the power to act unilaterally on behalf of the partnership thereby binding all other partners. Each partner also has the ability to unilaterally terminate the partnership or cease business operations. The partnership agreement, if in existence, may place restraints on these general control concepts.
Partners are joint and severally liable for the obligations of the partnership. Thus, a partner is liable for any injury that another partner may cause while conducting work-related activities. Each partner is also liable for any contract issue involving the partnership, regardless of the partner's involvement in the matter.
Like the sole proprietorships, many general partnerships change business structure from a general partnership to a corporation or limited liability company (LLC) to better suit the needs of the business and protect the owner.