LEGAL GUIDE
Written by attorney Adam Nathaniel Williams | Mar 7, 2016

Steps to Establish a General Partnership in Washington

RCW 25.05, et seq., governs general partnerships. Two or more persons (usually not a married couple) who agree to contribute money, labor, or skill to a business.

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Each partner shares the profits, losses, and management of the business. Each partner incurs personal liability equally for all debts of the partnership. Many partnerships document formal terms of the partnership in a written partnership agreement. However, partnerships can form without either party intending a partnership and without a written agreement. Advantages include partners may work with another for best solutions to issues; the partners may establish the partnership inexpensively and easily; a partnership creates more available capital for the business; a partnership enjoys greater borrowing capacity than a sole proprietorship; skilled employees may become partners; partnerships create an opportunity for income splitting; partners may keep business affairs silent and limited external regulation; and partners may change legal structure easily if circumstances change. Disadvantages include all partners incur unlimited liability for debts of the business; each partner remains “jointly and severally” liable for partnership’s debts (meaning each partner owes for all of the debts of the business not just their respective share); multiple partners increase the chances of disagreements and friction among partners and management; each partner incurs liability for all other partners as they all remain agents of the business; and anytime a partner joins or leaves, the partners must value all partnership assets resulting in additional costs.

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