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In a general partnership, all partners are entitled to participate in management and all partners are entitled to share in
profits and losses. There are many other rules in the Uniform Partnership Act that may result in an outcome that the partners
may not want. Fortunately, the Act allows the partners to modify these default rules by agreement. The specific rights of each
partner to participate in management and share in profits and losses and the other rules of partnership should be clearly agreed
upon by the parties before starting business. These matters should be documented in a written partnership agreement.
A major consequence of the partnership form of organization is the element of unlimited liability. If the assets of a partnership
are insufficient to pay the partnership's creditors, then each partner becomes personally liable to pay the entire deficiency. This
outcome is different than a corporation or limited liability entity, where each owner may be able to limit his or her liability to the
amount of their investment.
There are generally no filing requirements with governmental agencies which need to be satisfied in order to form a general partnership.
However, if the partnership will conduct business under a fictitious name, a fictitious name registration must be filed in Harrisburg and
advertised locally.
Although there is no legal requirement to do so, the partners should adopt a written partnership agreement prepared by an attorney
before the partnership begins business. The partnership agreement will set forth the rights and obligations of the partners. Some of the
issues which are addressed in a partnership agreement include: the current and future contributions which will be required of each partner,
the allocation of profits and losses among partners, the restriction on transferability of an interest in the partnership, the limitation
imposed on each partner's right to manage the business and make decisions, the events causing termination of the partnership such as the
death or withdrawal of a partner, and the amount payable to a partner upon redemption of his or her interest in the partnership.
If you need an attorney and don't have one, the Lawyer Referral and Information Service can help.
Call Us Monday - Friday from 8:30 AM - Noon and 1:15 PM - 3:00 PM
at (814) 459-4411. |
