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By definition, a general partnership in Rhode Island is a for-profit business that two or more people carry on as co-owners. General partners normally have equal rights to share their business’s profits and are equally liable for business debts.
In this article, we review how to form a general partnership in Rhode Island and why it might be right for you.
Different business owners have different business needs, so a general partnership might suit some owners well while being a poor choice for others. What kind of choice is a general partnership for you? We have compiled a list of common pros and cons of starting a general partnership to help you come to a conclusion.
There can be many positive features of a general partnership, such as:
The simplicity of starting and running a general partnership can be a large draw for many entrepreneurs, but this business structure is generally better suited for short-term projects. General partnerships often end when one partner dies or walks away.
It may be simple in a lot of ways, but the general partnership structure has potentially complicated aspects, including:
With the minimal personal liability protections in a general partnership, a bad decision of one of your general partners could affect your personal assets. Fortunately, other types of partnerships can offer you more protection. A limited partnership and limited liability partnership often provide more security for the personal assets of business owners.
Unlike several other business entities, there are generally no Rhode Island general partnership registration requirements for formation. An unregistered general partnership normally uses the legal names of all of its partners as the business name. If you want a different or more creative name for your general partnership, you need to file paperwork with the state or local government.
You can get creative when choosing a name for your general partnership, but you need to file paperwork with the government to register a trade name. Some states call a trade name a “doing business as” or DBA name. Your general partnership’s DBA is any business name that is different from all the general partners’ legal names. It’s important to check with your city clerk for their specific requirements, but registering your DBA can require:
Taking these extra steps for a different business name can be worth it, and we can make these steps easier for you with our Rhode Island DBA Service.
The success of your business often hinges on the business choices you make. Don’t you want the maximum amount of control that you can have over your business choices? If you want to maximize control over your choices as a business owner, you’ll likely need to draft and sign a Rhode Island General Partnership Agreement. With a Partnership Agreement, you can write your own rules about how to address business matters such as:
Without a Partnership Agreement, you have to conduct your business according to the default rules in Rhode Island’s Uniform Partnership Act. Rhode Island’s default rules might not properly address your unique business needs and they might hinder your success. If you want more control over your business, it’s usually best to write your own rules whenever you can.
You might not need to register as a general partnership in Rhode Island to start one, but that doesn’t mean you don’t have to file any business paperwork with the government. For authority to conduct business, many partnerships need licenses, clearances, and permits from the government. They might need these authorizations at the local, state, and federal government levels, or combinations of the three. At the state level, common authorizations can include:
How do you know which licenses your general partnership needs? You have to do a hefty amount of research. But you don’t need to fret about figuring out all of your licensing needs on your own. With our partners at Avalara, we can do this research for you and list all of your needs in our Rhode Island Business License Report.
As you likely already know, paying taxes is a big part of running a legally compliant business. To fulfill its federal tax obligations, your general partnership must have an Employer Identification Number (EIN) from the IRS. An EIN is how the IRS identifies businesses on tax paperwork, and every partnership has to have one. We imagine getting an EIN is yet another business administration task among the many on your desk, but we can handle this for you with our Employer ID Number Service.
Your general partnership will also likely owe several state taxes. Paying these taxes often requires tax accounts or tax identification numbers from the state. You can contact the Rhode Island Division of Taxation for help setting up these accounts and numbers.
Setting up your finances and safeguarding your property after you start a new business is important. Once you have your general partnership in place, it’s usually best to open a business bank account and obtain insurance for your business’s assets. You can use the general partnership’s EIN to open new business policies and accounts for the business.
Forming a partnership in Rhode Island can be simple, but also a lot of work. If the thought of growing your business while keeping it legally compliant exhausts you, you can rest easier with our help. We offer a large catalog of business development and maintenance services. Specifically, we can help you keep your business legally compliant with our Worry-Free Compliance Service. We’re here to help set up business owners like you for success!
If you want to start a business but you don’t want it to be a general partnership, you have plenty of other choices. Instead, you could start a limited liability company (LLC) or corporation. We can help you form these other business types with our Rhode Island LLC and Rhode Island Corporation Formation Services. Our help includes a Rhode Island Operating Agreement Template and more information on Rhode Island Articles of Incorporation.
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.
If you want to start a general partnership in Rhode Island, you don’t have to register it. But your general partnership might need to file other paperwork with the government to keep it legally compliant or if operates under a trade name.
General partnerships don’t have to pay income taxes at the entity level. Instead, each partner pays income taxes on their share of the business income and reports the information on their personal tax return. This is pass-through taxation.
A partner owns the right to share the profits of a general partnership, and a partner has the right to manage the partnership. If a partner transfers their right to business profits to another person, that new owner of the profits doesn’t necessarily have the right to manage the general partnership.
You can start a general partnership simply by engaging in a for-profit business with a co-owner. Rhode Island’s partnership law dictates how you operate your general partnership unless you draft and sign a Partnership Agreement with different business operation rules.
Normally, all general partners are responsible for the partnership’s debts.