The general partnership is the simplest business entity created by two or more business owners to engage in business. However, its benefits are often outweighed by the costs associated with the general partnership model. Typically, the partners manage the day to day business of the partnership.
1
Formation
General partnerships are formed by two or more individual owners associating to carry on a business for profit. There are generally no organizational documents, or other formalities required to form a general partnership. It would be a big mistake for two or more individuals to go into business together as partners without a written partnership agreement.
2
Assets
Assets are typically owned by the general partnership and deployed in the business venture. Problems can arise when business assets are not properly designated as being owned or not being owned by the partnership. Care needs to be given to each asset used by the business to make clear who owns the particular asset in question.
3
Liabilities
Liabilities, such as for office supplies and the like, are generally owed by the general partnership. In the event the general partnership shall fail, the individual partners are typically responsible for the unpaid debts of the business.
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Fictitious Names
Typically a general partnership is operated under the name of the general partnership. The owners may wish to use a business name different from the name of the general partnership, and may protect the use of the business name by making a fictitious name filing with the Florida Secretary of State.
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Taxation
A new general partnership can generally be created, and assets transferred to it, in a tax free transaction. The profits and losses from the operations of a general partnership are reported on IRS Form 1065 for federal income tax purposes. The separate share of each partner is reflected on the Schedule K-1s to the partnership’s tax return. The separate share is then reported on each of the partner’s individual income tax return (Typically IRS Form 1040). The general partnership must keep separate books and records for the partnership’s financial activities. The State of Florida does not impose an income tax on the profits or losses of a general partnership. The partners report and pay their respective shares of partnership profit and losses. If there is a corporate partner, the partnership must file an information return with the Florida Department of Revenue (Form F-1065). A general partnership obtains an Employer Identification Number for use with its business’ bank accounts and empl
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