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A general partnership is one of the simplest business forms. If you agree with one or more people to start a business for profit as co-owners, you’ve formed a partnership, whether or not you intended to. If you’re wondering how to form a general partnership in Delaware, we can help.
The first thing to know is that Delaware general partnership registration isn’t required to start your business. Forming a partnership in Delaware can be simple, low maintenance, and beneficial for tax purposes, but that doesn’t mean it’s the right fit for everyone. Our business experts developed this list of the most important things to know when starting your Delaware general partnership.
The partnership is a popular business form because it’s easy to start. There’s no legal requirement to register as a general partnership in Delaware before legally conducting business. The owners of a partnership usually share in the business decisions and split profits equally. However, partnerships have other pros and cons for you to consider.
The partnership structure can be beneficial because:
Despite their benefits, general partnerships aren’t for everyone. The best business form for you depends on your individual circumstances.
Along with the simplicity of the form come the drawbacks:
While we can explain the general pros and cons of the partnership structure, only a legal or financial advisor can review your circumstances and advise you on what is best to meet your goals. You may want to consider consulting a professional whether you’re set on the partnership structure or haven’t made any decisions yet.
One of the first steps in starting any business is to choose a name. Your business name represents your business goodwill and allows your customers to identify your business. When you start a general partnership in Delaware, the law assumes you’ll use the partners’ first and last names.
You can include the word “Company,” “Association,” “Club,” “Foundation,” “Fund,” “Institute,” “Society,” “Union,” “Syndicate,” or “Trust” if appropriate for your business. For example, if your name is Sarah Smith and you agree to be co-owners with Mike Baker, you could name your partnership “The Smith and Baker Association.” If the partners want to use different a name, you must register a DBA name.
If you want to use a business name that doesn’t include the partners’ names, you must file a “doing business as,” “DBA,” “fictitious,” or “trade” name. Your registered name must be different from other registered businesses, so have a few ideas in mind. When you’ve verified that your name is unique, you’ll need to complete a Registration Certificate. Then, file the Registration with the Office of the Prothonotary in each county where you plan to transact business. If you’re not set on a name yet, you can file to reserve a name with the Secretary of State for 120 days, plus renewal.
When you start your partnership, it’s important to draft and sign a partnership agreement. Your Delaware General Partnership Agreement will say how to resolve conflicts between owners. You can make rules for how a partner may dissociate, when the partnership will dissolve, and what kinds of rights the individual partners will have. Most Partnership Agreements are written and signed by the founding partners, but your agreement could be oral or implied and have the same effect.
If the partners experience a conflict and you haven’t discussed a Partnership Agreement, the rules in Chapter 15 of the Delaware Code, the Delaware Revised Uniform Partnership Act will govern the dispute. The law contains default rules for the partners’ duty of loyalty, their duty of care, dissociation, and dissolution.
Although there’s no formal requirement to register your business partnership with the Delaware Secretary of State before conducting business, you must obtain a Delaware business license from the Delaware Division of Revenue. Also, depending on where your business is located, your city or county may require you to obtain a local business license.
If you’re working in a regulated industry, like construction or agriculture, you’ll need to apply for the appropriate license. Delaware doesn’t require businesses to register for and collect sales tax, but you will pay a gross receipts tax if you sell goods.
Finding all the licenses and permits your business needs can get complicated. With our partners at Avalara, we can save you time by compiling a Business License Report that identifies your licensing and permitting needs at every level of government.
The IRS issues an Employer Identification Number (EIN) to new businesses so it can identify your business when you pay federal taxes and report wage withholding. The IRS requires partnerships to have EINs. Applying for an EIN can be another task on your growing to-do list, but we can help you check it off with our Employer ID Number Service.
Depending on what type of business you run, you’ll be responsible for certain state taxes, including state wage withholding and industry-specific taxes. To register, you can sign up online using the Delaware Business One Stop. The One Stop will connect you to the Delaware Division of Revenue, Division of Unemployment Insurance, and Office of Workers’ Compensation.
Once you’ve applied for licenses and obtained an EIN, you can apply for a business bank account. You’ll want to open a new account to keep your business income separate from your personal finances. Be sure to file for a U.S. Patent or Trademark if you have intellectual property to protect. Finally, you’ll need to search the private marketplace for the right level of insurance for your business.
By now you have an extensive list of tasks to complete, but starting a Delaware general partnership is a relatively simple process. Planning now for how to resolve ownership disputes and finding what licenses you will need will save you time later. When you explore our extensive suite of business development and maintenance services, we’ll be here to help you easily fulfill many of your business obligations.
Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
You’re not required to register to start a general partnership in Delaware, but you will need a business license before you conduct business in the state.
Yes, Delaware general partnerships must pay an annual tax of $300 by June 1st each year.
In a general partnership, the owners are called partners. Partners typically share responsibility equally for business decisions and financial obligations.
The partners of a general partnership share in the business decision-making and direct liability for the partnership.
The partners are jointly and severally liable for the debts of the partnership. However, under the law, a creditor must satisfy its debts through the partnership first.
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