How to Create a General Partnership in Pennsylvania: A Beginner’s Guide


Steve Goldstein
Steve Goldstein
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Create a General Partnership in Pennsylvania

Forming a general partnership in Pennsylvania can be a great way to combine your skills, resources, and ideas to create a thriving business. In Pennsylvania, also known as The Keystone State, general partnerships are relatively easy to establish, making them an attractive option for entrepreneurs who want to keep things simple and cost-effective.

This article will guide you through the essential steps to start a general partnership in Pennsylvania. From understanding the legal requirements and drafting a partnership agreement to registering your partnership and obtaining necessary permits, we’ll provide you with the necessary tools and insights to help you launch your business venture. Whether you’re opening a boutique retail store or a cutting-edge tech startup, this comprehensive guide will help you navigate the process of starting a general partnership in Pennsylvania.

What is General Partnership In Pennsylvania

It is a business structure where two or more people come together to form a jointly owned business. In the general partnership business, the partners agree upon sharing assets, responsibilities, profits, and liabilities (legal & financial). In a general partnership, Partners consent to carry potentially unlimited liability personally. Liabilities are not restricted as they would be, for example, in a limited liability partnership (LLP) or a limited liability company (LLC) structure. Unlike the LLCs, a partner, in this case, can be legally sued for any business debts, and a possibility of seizure of personal assets can occur.

Before you start setting up your general partnership, it is advised that you consult a legal person. They will know what is best for you and your business. You can always form an LLC instead of a general partnership to protect your personal assets from business debts.

LLCBuddy Editorial Team

How to Create a General Partnership in Pennsylvania

To create a general partnership in Pennsylvania, you must follow the guidelines below: forming a business name, making a partnership agreement, requesting an EIN, getting a license and permit, getting a state-based tax ID, and opening a bank account.

Step 1: Choose a Business Name in Pennsylvania

Naming your business is one of the most crucial activities during the startup phase. Your general partnership name is the foundation for your brand in Pennsylvania and is what clients use to connect you to the products or services you offer. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity without being hampered by irrelevant factors.

If you want to set up an LLC, there is a complete guide on Pennsylvania LLC name guidelines for a proper business name. Here are some guidelines you must follow while naming your general partnership-

  • Name availability: The name should be available, and no other entity should have the same name in Pennsylvania.
  • Trademarks
  • Limit of restricted words that need a license in Pennsylvania

In Pennsylvania, if you register your general partnership business with the Pennsylvania Secretary of State, then the name you choose will be the company’s official name. On the contrary, unregistered general partnership businesses use the last name of all of their partners by default. For instance, if Selena Gomez and Hailey Beiber enter business together, the partnership name is “Gomez & Bieber” by default if unregistered. However, if you would like to form a business name under something more appropriate, such as “EJI Design and Build,” then you’ll need to file a “Doing Business As (DBA)” name with Pennsylvania SOS.

In Pennsylvania, if you do not wish to file your general partnership business right away but want to hold the name that you have decided on, then you can reserve your business name for 120 days. You must file a name reservation application with the SOS to keep the name.

Step 2: Make a Partnership Agreement

After you have chosen a business name for your general partnership, the next step would be making a partnership agreement in Pennsylvania. A partnership agreement is a legal contract that specifies how a for-profit company would operate when run by two or more people.

The partnership agreement specifies each partner’s roles within the company, their ownership stakes, and their share of profits and losses. Additionally, it discusses business management guidelines and potential contingencies that may arise, such as a partner’s passing or a partner’s decision to leave the partnership. A partnership agreement should include the following:

  • Name of Partners
  • The principal address of the partnership
  • Purpose of the partnership
  • Terms of the partnership
  • Partnership start date and end date (if not for infinite time)
  • Partnership dissolution terms (for finite partnership)
  • Capital contribution of partners
  • Share of Interest of Partners
  • Profit distribution of partners (equal distribution by default, if not specifies any special condition)
  • Salary distribution (if applicable)
  • Partnership Management Terms
  • Terms of Partnership Sale

These key factors must be considered when forming or creating a partnership agreement in Pennsylvania. In this way, all business partners will understand what this is about and how to proceed if the mentioned scenarios happen in Pennsylvania.

Without a Partnership Agreement, your company will often be subject to the general partnership default laws of Pennsylvania. The default laws in Pennsylvania might not be appropriate for your requirements. Hence, it is important to have a transparent agreement while forming a partnership.

Step 3: Request an EIN in Pennsylvania

After documenting the partnership agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website. Getting EIN is necessary whether you are opening an LLC in Pennsylvania, or a general partnership, or something else.

The application of an EIN in Pennsylvania can be through the following:

  • Apply Online- You can apply for EIN online, which is the most desirable and fastest method for users.
  • Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in several ways. It will provide your general partnership with the final advantage necessary to operate fully without encountering legal or judicial issues. For more details about EIN for your business, you may check why you need EIN.

Step 4: License and Permit for General Partnership in Pennsylvania

Before your general partnership business operates in Pennsylvania, you must have a business license first. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs.

To legally operate your partnership, you must apply for a business license to Pennsylvania Department of State. In some states, you might need to obtain a Privilege License. Based on the business structure, you might need it. In Pennsylvania, partnership businesses do not need to get to obtain a privilege license. You might even need more than one license in Pennsylvania. Numerous general partnership licenses need to be filed and renewed regularly.

Step 5: Obtain Pennsylvania Tax ID Number

In Pennsylvania, to conduct a business, you must comply with the Pennsylvania Department of Revenue. If you have a general partnership in Pennsylvania, you must obtain the Pennsylvania Tax ID number from Pennsylvania Department of Revenue. Your partnership business must pay state taxes (if applicable).

Step 6: Open a Bank Account

Once you have filed and received your general partnership license, you should now open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Pennsylvania might be simpler with a US business bank account because it boosts your company’s legitimacy and liquidity. Most banks demand an EIN for creating a business bank account for firms other than sole proprietorships. Also, keeping separate finances helps you avoid combining personal and professional finances.

Example of General Partnership in Pennsylvania

Individuals looking to collaborate and numerous kinds of service providers have chosen general partnerships as their preferred business entity. That’s frequently because of its simple design, low price, and simplicity of setup. Some general partnership examples include:

  • Providing professional services (architectural firms, medical clinics, etc.)
  • Selling goods at retail
  • Opening a restaurant
  • Business Consulting

General partnerships are also formed by partners who are spouses or other family members who want to operate a business together.

Important Information

Maintaining Business License in Pennsylvania

Now that you have established your general partnership, you must maintain or renew your business license every now and then. Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Paying your Taxes in Pennsylvania

Even if you have established your general partnership in Pennsylvania, pay your taxes and keep everything up to date so you won’t pay any penalty. Pennsylvania tax information will help you with what to pay before or during the operation of your professional corporation. You must check with Pennsylvania Department of Revenue for more details.

Advantages of General Partnership in Pennsylvania

  • Foundation only requires two people: Forming a general partnership doesn’t need many people to operate. You can form a general partnership with a partner in mind and a business plan. It can be a group of friends or colleagues, a family member, or a spouse and wife partnership.
  • Equal Rights: Everyone is granted equal rights when a business is founded using a general partnership; each partner is free to express their ideas and choose what is best for the company’s success.
  • Management Option: One of the advantages of joining a general partnership is the opportunity to select the finest management options for the company. For this reason, large partnerships should draft an agreement describing each partner’s responsibilities inside the business. As a result, each partner’s leadership abilities are enhanced.
  • Flexibility: General Partnership is the basic form of a business structure since it can be converted into any business entity, such as LLC. If you have flexibility in applying for an LLC in Pennsylvania, you will have default rules set by law, and you need to have an operating agreement for this.
  • Pass-through taxation: The pass-through tax structure will make the general partnership business not pay twice the tax. Due to this structure, most start-ups and entrepreneurs in Pennsylvania apply for a GP or LLC. And one of the main advantages of a general partnership is that partners don’t have to pay for the losses collectively.

FAQs

What is a general partnership in Pennsylvania?
A general partnership in Pennsylvania is a business structure that allows two or more people to own and operate a business as co-owners. All general partners are equally responsible for the debts and obligations of the business.
Who can form a general partnership in Pennsylvania?
Any two or more individuals, corporations, or other entities may form a general partnership in Pennsylvania.
What are the benefits of forming a general partnership in Pennsylvania?
Forming a general partnership in Pennsylvania offers several benefits. These include limited liability protection for all partners, pass-through taxation, and less paperwork than other business structures.
What paperwork is required to form a general partnership in Pennsylvania?
To form a general partnership in Pennsylvania, you will need to register your business with the Pennsylvania Department of State. You will also need to obtain an Employer Identification Number (EIN) from the IRS, as well as any necessary business licenses and permits.
How much does it cost to form a general partnership in Pennsylvania?
The cost to form a general partnership in Pennsylvania will vary depending on the specifics of your business. Generally, it will cost around $125 to register your business with the Pennsylvania Department of State. You may also need to pay additional fees for any business licenses and permits you need to obtain.
What taxes must be paid by a general partnership in Pennsylvania?
General partnerships in Pennsylvania must pay federal, state, and local taxes. These taxes may include income tax, self-employment tax, corporate tax, and any applicable sales or use taxes.
Does a general partnership in Pennsylvania need to file a separate tax return?
Yes, a general partnership in Pennsylvania must file a separate tax return in addition to the individual tax returns of the partners.
Does a general partnership in Pennsylvania need to have a written agreement?
Yes, it is recommended to have a written agreement in place when forming a general partnership in Pennsylvania. This will help to ensure that all partners understand their rights and responsibilities.
What are the liabilities of a general partnership in Pennsylvania?
In a general partnership in Pennsylvania, all partners are jointly and severally liable for the debts and obligations of the business. This means that each partner can be held liable for the full amount of any debts and obligations, even if only one partner is responsible for them.
Does a general partnership in Pennsylvania need to have insurance?
Yes, it is recommended to have business insurance for a general partnership in Pennsylvania. This will help protect the partners from any liabilities that arise from the business.
Does a general partnership in Pennsylvania need to hold an annual meeting?
No, there is no requirement to hold an annual meeting for a general partnership in Pennsylvania. However, it is recommended to hold regular meetings to discuss the business and ensure that all partners are on the same page.
Is it possible to convert a general partnership in Pennsylvania to another business structure?
Yes, it is possible to convert a general partnership in Pennsylvania to another business structure. This can be done by filing the appropriate paperwork with the Pennsylvania Department of State.
Is it possible to dissolve a general partnership in Pennsylvania?
Yes, it is possible to dissolve a general partnership in Pennsylvania. This can be done by filing the appropriate paperwork with the Pennsylvania Department of State and following any additional steps required by the state.
Can a general partnership in Pennsylvania be sued?
Yes, a general partnership in Pennsylvania can be sued. All partners can be held liable for the debts and obligations of the business.
What type of records must a general partnership in Pennsylvania maintain?
A general partnership in Pennsylvania must maintain complete and accurate records for the business. This includes financial records, contracts, licenses, and any other documents related to the business.
How is a general partnership in Pennsylvania different from a limited liability company (LLC)?
A general partnership in Pennsylvania is different from an LLC in that all partners are personally liable for the debts and obligations of the business. An LLC offers limited liability protection for its members.
How is a general partnership in Pennsylvania taxed?
A general partnership in Pennsylvania is a pass-through entity, meaning all profits and losses pass through to the partners. The partners then report their share of the income on their individual tax returns.
Are there any restrictions on how a general partnership in Pennsylvania can be managed?
Yes, there are some restrictions on how a general partnership in Pennsylvania can be managed. All partners must agree on major decisions and all profits and losses must be shared equally.
Does a general partnership in Pennsylvania need to have a registered office?
Yes, a general partnership in Pennsylvania must have a registered office in the state. This is the address that will be used to receive official correspondence from the Pennsylvania Department of State.
What is the default tax status of a general partnership in Pennsylvania?
The default tax status of a general partnership in Pennsylvania is a pass-through entity. All profits and losses are passed through to the partners who report them on their individual tax returns.
Can a general partnership in Pennsylvania issue stock?
No, a general partnership in Pennsylvania cannot issue stock. This structure does not offer investors an ownership stake in the business.
Can a general partnership in Pennsylvania enter into contracts?
Yes, a general partnership in Pennsylvania can enter into contracts. All partners must agree on the terms of the contract and any liabilities arising from the contract are shared among the partners.
Can a general partnership in Pennsylvania own property?
Yes, a general partnership in Pennsylvania can own property. All partners must agree on the terms of ownership and any liabilities arising from the property are shared among the partners.
Are there any restrictions on the activities of a general partnership in Pennsylvania?
Yes, there are some restrictions on the activities of a general partnership in Pennsylvania. The partnership cannot engage in activities that would require it to register as a corporation or limited liability company.
Does a general partnership in Pennsylvania pay unemployment taxes?
Yes, a general partnership in Pennsylvania must pay unemployment taxes. This is in addition to the taxes paid by the individual partners.
Does a general partnership in Pennsylvania need to file an annual report?
Yes, a general partnership in Pennsylvania must file an annual report with the Pennsylvania Department of State. This report must be filed each year and updated with any changes to the partnership.
Are there any restrictions on how profits are distributed in a general partnership in Pennsylvania?
Yes, profits must be distributed equally among all partners in a general partnership in Pennsylvania. No partner can receive a larger share of the profits than the other partners.
What is a General Partnership in Pennsylvania?
A General Partnership in Pennsylvania is a business structure where two or more individuals share ownership of a business and share profits and losses.
What are the benefits of forming a General Partnership in Pennsylvania?
Forming a General Partnership in Pennsylvania provides protection from personal liability, allows for easy setup and management, and offers attractive tax advantages.
What are the requirements for forming a General Partnership in Pennsylvania?
To form a General Partnership in Pennsylvania, partners should draft a legal partnership agreement and register the business with the state.
What are the legal implications of forming a General Partnership in Pennsylvania?
As the owners of the business, the partners share responsibility for debts, taxes, and legal obligations of the business.
Are there any restrictions on forming a General Partnership in Pennsylvania?
Yes, some Pennsylvania counties have restrictions on forming a General Partnership. It is important to check local laws before forming a General Partnership in Pennsylvania.
How is a General Partnership in Pennsylvania taxed?
A General Partnership in Pennsylvania is not a separate taxable entity; the tax liability is passed through to each partner’s individual tax return.
How is a General Partnership in Pennsylvania dissolved?
A General Partnership in Pennsylvania can be dissolved in accordance with the terms of the partnership agreement or at the unanimous agreement of the partners.
Are there other business structures available in Pennsylvania?
Yes, other business structures are available in Pennsylvania, including Limited Liability Companies and Corporations.

Also Read

Why Create General Partnership Pennsylvania is So Important

One of the main reasons that creating a general partnership in Pennsylvania is crucial is because it allows for the pooling of resources and expertise. When two or more individuals come together to form a general partnership, they are able to combine their skills, knowledge, and financial resources to create a successful business. This collaborative effort can often lead to greater success than if each individual were to go it alone.

Additionally, creating a general partnership in Pennsylvania can provide a sense of security and legal protection for the partners involved. By establishing a clear agreement outlining the roles, responsibilities, and expectations of each partner, potential conflicts and disagreements can be avoided down the road. This can help to ensure a smoother and more harmonious working relationship between partners.

Creating a general partnership in Pennsylvania can also offer tax benefits for the business partners. Unlike a corporation, a general partnership is not taxed at the entity level. Instead, the profits and losses of the business are passed through to the individual partners, who are then taxed at their individual tax rates. This can result in potential tax savings for the partners, making a general partnership an attractive option for those looking to minimize their tax liability.

Furthermore, a general partnership in Pennsylvania allows for greater flexibility and autonomy in decision-making. Unlike a corporation, where decisions are often made by a board of directors or shareholders, a general partnership allows the partners to have more control over the direction and operations of the business. This can lead to quicker decision-making and more efficient problem-solving, ultimately benefiting the success of the business.

Another important reason to create a general partnership in Pennsylvania is the ease of formation and dissolution. In comparison to other business structures, such as corporations or limited liability companies, forming a general partnership is relatively simple and straightforward. This can save time and money for entrepreneurs who are eager to get their business up and running quickly.

Overall, creating a general partnership in Pennsylvania is a crucial step for entrepreneurs looking to start a business. It offers a range of benefits, including the pooling of resources, legal protection, tax advantages, decision-making autonomy, and ease of formation. By taking the time to establish a general partnership, individuals can set themselves up for success and lay the foundation for a thriving and prosperous business venture.

Conclusion

In conclusion, starting a general partnership in Pennsylvania may effectively combine resources, expertise, and creativity to achieve your mutual business goals. By understanding the legal requirements, drafting a thorough partnership agreement, and registering your partnership, you’ll be well on your way to a successful collaboration. As you embark on this exciting journey, remember to maintain open communication and stay committed to the shared vision that inspired your partnership in the first place.

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