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In Pennsylvania, a general partnership is a business entity that forms when two or more individuals decide to own a for-profit business together. You don’t even have to intend to form a partnership to start one.
Learn how to form a general partnership in Pennsylvania and why this choice may be right for you.
General partnerships aren’t for every business owner, but they can be good options for many. Let’s go over some of the pros and cons of general partnerships.
If you choose to start a general partnership, you can enjoy many benefits of this business structure, such as:
Depending on your specific business needs, you might find additional benefits of starting a general partnership. General partnerships often work well for short-term business projects, but you may want to use a different structure if you’re seeking to start a business that lasts for multiple generations. Consulting legal and financial professionals can help you best identify how well a general partnership business structure will work for you.
Although starting and maintaining a Pennsylvania general partnership can be relatively simple, this type of business entity is not without potential complications. The pitfalls of starting and running a general partnership can include:
If you are a general partner in a general partnership, your business’s financial obligations could affect your personal assets. That might be a scary thought for you, but there are more protective types of partnerships you can start. For added protection, you can start a limited liability partnership, a limited partnership, or a limited liability limited partnership.
Choosing a business name for a general partnership can be pretty easy! There are no Pennsylvania general partnership registration requirements to form the business, and many unregistered general partnerships just use all the general partners’ legal names for the business name. If you want your general partnership to have a name that is different from the general partners’ names, you need to register that name with the commonwealth.
So, what if you don’t want to use your partners’ names to name your general partnership? Whatever different name you come up with is an assumed name, or “doing business as” name (DBA). You have to register your general partnership’s DBA with the Pennsylvania Department of State (DOS). To properly register a DBA, you usually must:
Registering a DBA requires extra work. However, having an assumed name can protect your partners’ identities and allow you to have more creativity with the image of your business.
Going into business for yourself can mean you have the freedom to make your own decisions about your business’s operations. Why not maximize that freedom as much as you can? Writing a Pennsylvania General Partnership Agreement can be a great way to increase your control over your business. With a Partnership Agreement, you can write your own rules for matters such as:
Without a Partnership Agreement, you have to conduct your general partnership according to the default rules of Pennsylvania’s Uniform Partnership Act. Sometimes these default rules don’t serve your needs well, so writing your own business operations rules is often best.
You don’t have to register as a general partnership in Pennsylvania to get your business started, but you might have to file other paperwork to have the legal authority to run your general partnership. Common paperwork you might have to file is paperwork to obtain business licenses, permits, or clearances. Most businesses must have at least one authorization from the federal, state, or local government. Your need for these authorizations depends on the nature and needs of your business. You might even need multiple licenses, clearances, or permits. Common state licenses you might need include:
There’s a good chance you will encounter most of your licensing needs at the local level. You can check your county and city websites for information about their licensing and permitting requirements.
One of the most taxing parts of getting these clearances, licenses, and permits is figuring out which ones you need. We take the guesswork out of this process with our partners at Avalara through our Business License Report. This service researches and identifies your licensing needs at the federal, state, and local levels.
Your general partnership will likely have to file a federal tax return. You want to make sure you file these tax returns properly. A general partnership must have an Employer Identification Number (EIN) from the IRS to file correctly. Getting an EIN takes extra time and effort, but we can take that work off your hands with our Employer ID Number Service.
Your general partnership’s state tax obligations depend on your business activities. To properly pay your state taxes, you might need multiple state tax identification numbers, such as an Employer Account Identification Number or a Sales Tax Account Identification Number. You can contact the Pennsylvania Department of Revenue for help with getting your tax identification numbers.
So, what’s next if you decide to form a general partnership in Pennsylvania? Once you’ve filed your necessary paperwork with the government, it’s a great idea to apply for a business bank account and insurance to protect your business properties and finances. You can use your EIN to put your accounts and policies in the partnership’s name.
Although the formation part is relatively easy, a general partnership often needs to fulfill multiple obligations to remain legally compliant. We can help you do this with ease. And our catalog of business development and maintenance services can help you keep your business running smoothly.
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.
Normally, you don’t have to register anything to start a general partnership in Pennsylvania. But your general partnership will likely have to file paperwork with the government to fulfill its licensing and tax obligations.
A general partnership is a pass-through tax entity in Pennsylvania, meaning that the business doesn’t pay income taxes. Rather, each partner pays income taxes on their share of the partnership income.
Each general partner has a right to share the partnership’s profits and manage the partnership. Basically, a partner is an owner. A partner can transfer their share of the profits to another individual, but the new owner of the right to profits doesn’t necessarily have a right to manage the partnership.
You can start a general partnership by conducting a for-profit business with a co-owner. You must conduct your business according to Pennsylvania’s Uniform Partnership Act or your signed Partnership Agreement.
Normally, all general partners are jointly and severally responsible for the general partnership’s debts.