General Partnerships

Our Atlanta business attorneys help Georgia business owners understand, form, and manage general partnerships with clear guidance, practical strategies, and legal protection that sets your business up for success.

One of the most crucial decisions a new business owner makes is selecting the business structure. General partnerships are unique due to one basic fact: a partnership is the base-level organization and can be formed in Georgia without the need to actively create one.

At the most basic level, a general partnership (also known as a partnership) is an association of two or more people who come together as co-owners of a business for profit. When this situation occurs, you have a partnership under Georgia law.

Partnership Agreements

A partnership agreement allows the founders to describe and document the entire relationship between the parties. This includes matters such as whether partners receive salaries from the partnership, the rights and duties of each partner, the manner in which partners share in the profits, losses, and cash flows of the business, and the transferability of each partner’s interest in the organization.

Advantages of General Partnerships in Georgia

Similar to an S corporation, partnerships are treated as a pass-through entity for income tax purposes. This means that partners pay for the entity’s income taxes (rather than the business), and the partners can deduct partnership losses on their personal tax returns.

Another advantage of partnerships is the simplicity. They do not have to file with their Secretary of State. Typically, there are no filing requirements or costs associated with forming a partnership. Additionally, there are typically no formal operational requirements that demand any sort of compliance reports.

Disadvantages of General Partnerships in Georgia

While there are numerous benefits to forming a general partnership, it also has some significant shortcomings. First, the pass-through taxation structure can create liquidity problems for the partners.

Second, all the partners have unlimited joint and several liability for the actions of the partnership. This means that if the partnership is sued, a litigant can come after the partners’ personal assets, not just the business assets.

Third, each partner can bind the general partnership in all business matters because of the inherent agency relationship between each partner and the business. This means that a rogue or simply confused partner can bind the company to a contract that the other partners did not agree to.

Fourth, and finally, depending on the terms of the Partnership Agreement, a partner’s interest in the company can be either easily transferable (meaning an outsider can be made an equal member of the firm) or not easily transferable (leading to possible liquidity issues).