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


Steve Goldstein
Steve Goldstein
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Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Create a General Partnership in Arizona

Forming a general partnership in Arizona can be a great way to combine your skills, resources, and ideas to create a thriving business. In Arizona, also known as The Grand Canyon 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 Arizona. 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 Arizona.

What is General Partnership In Arizona

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 Arizona

To create a general partnership in Arizona, 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 Arizona

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 Arizona 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 Arizona 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 Arizona.
  • Trademarks
  • Limit of restricted words that need a license in Arizona

In Arizona, if you register your general partnership business with the Arizona 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 Arizona SOS.

In Arizona, 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 Arizona. 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 Arizona. In this way, all business partners will understand what this is about and how to proceed if the mentioned scenarios happen in Arizona.

Without a Partnership Agreement, your company will often be subject to the general partnership default laws of Arizona. The default laws in Arizona 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 Arizona

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 Arizona, or a general partnership, or something else.

The application of an EIN in Arizona 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 Arizona

Before your general partnership business operates in Arizona, 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 Arizona Department of Revenue. In some states, you might need to obtain a Privilege License. Based on the business structure, you might need it. In Arizona, partnership businesses do not need to get to obtain a privilege license. You might even need more than one license in Arizona. Numerous general partnership licenses need to be filed and renewed regularly.

Step 5: Obtain Arizona Tax ID Number

In Arizona, to conduct a business, you must comply with the Arizona Department of Revenue. If you have a general partnership in Arizona, you must obtain the Arizona Tax ID number from Arizona 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 Arizona 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 Arizona

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 Arizona

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 Arizona

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

Advantages of General Partnership in Arizona

  • 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 Arizona, 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 Arizona 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 Arizona?
A general partnership in Arizona is a business structure in which two or more individuals or entities share ownership and management of the business. The partners each contribute capital and share in the profits and losses of the business.
Who can form a General Partnership in Arizona?
Any two or more individuals or entities, including corporations, LLCs, and other partnerships, can form a general partnership in Arizona.
What paperwork is required to form a General Partnership in Arizona?
To form a general partnership in Arizona, you must create a partnership agreement that outlines the terms of the partnership, including the contributions of the partners, the management structure, and the rights and responsibilities of each partner. You must also register the partnership with the Arizona Corporation Commission.
Is a General Partnership in Arizona a separate legal entity?
No, a general partnership in Arizona is not a separate legal entity; it is an agreement between the partners.
Are the partners liable for the debts of the business?
Yes, the partners in an Arizona general partnership are personally liable for the debts and obligations of the business.
Does a General Partnership in Arizona require a tax filing?
Yes, a general partnership in Arizona must file an Arizona Partnership Tax Return each year.
Are there any additional taxes due as part of a General Partnership in Arizona?
Yes, the partners in an Arizona general partnership are subject to Arizona’s income tax.
How can a General Partnership in Arizona be dissolved?
An Arizona general partnership can be dissolved voluntarily by the partners or involuntarily by a court.
What is the impact of dissolving a General Partnership in Arizona?
When a general partnership in Arizona is dissolved, all of its assets must be liquidated and all of its debts and liabilities must be paid. Any remaining assets are distributed to the partners according to their ownership interest.
What is a General Partnership?
A general partnership is a form of business structure in which two or more individuals operate a business as co-owners. In Arizona, general partnerships must register with the Arizona Corporation Commission.
What is required to form a General Partnership in Arizona?
To form a general partnership in Arizona, the partners must create and file a Certificate of Partnership with the Arizona Corporation Commission.
What are the advantages of a General Partnership in Arizona?
The main advantages of forming a general partnership in Arizona include the ability to share profits and losses, the flexibility to make decisions regarding the business, and the ability to use the business’s losses to reduce the partners’ personal taxes.
What are the disadvantages of a General Partnership in Arizona?
The primary disadvantages of forming a general partnership in Arizona include the potential for unlimited personal liability for all of the partners, the necessity of unanimous agreement on major decisions, and the potential for disputes between the partners.
Is a General Partnership required to have an operating agreement in Arizona?
While operating agreements are not legally required in Arizona, they are highly recommended to ensure that the partners understand their respective roles and responsibilities, as well as to provide a mechanism for resolving disputes.
Do the partners of a General Partnership in Arizona have to pay taxes?
Yes, the partners of a general partnership in Arizona are required to pay taxes on their individual share of the partnership’s income, as well as on any distributions they receive from the partnership.
Does a General Partnership in Arizona require an annual filing?
No, a general partnership in Arizona does not require an annual filing with the Arizona Corporation Commission.
Are there any fees associated with forming a General Partnership in Arizona?
Yes, there are filing fees associated with forming a general partnership in Arizona.
Is a General Partnership in Arizona required to have an EIN?
Yes, in order to open a business bank account and to pay taxes, a general partnership in Arizona is required to obtain an Employer Identification Number (EIN) from the IRS.
What are the legal requirements for being a partner in a General Partnership in Arizona?
In order to be a partner in a general partnership in Arizona, the individual must be at least 18 years of age and have the capacity to enter into a contract.
Is a General Partnership in Arizona required to have a business license?
Yes, depending on the type of business the partnership is conducting, the Arizona Corporation Commission may require the partnership to obtain a business license.
What is the difference between a General Partnership and a Limited Partnership in Arizona?
The main difference between a general partnership and a limited partnership in Arizona is that limited partners are not liable for the partnership’s debts and liabilities.
Are the partners of a General Partnership in Arizona personally liable for the partnership’s debts and liabilities?
Yes, in Arizona, the partners of a general partnership are personally liable for the partnership’s debts and liabilities.
Is a General Partnership in Arizona required to file a tax return?
Yes, a general partnership in Arizona is required to file an Arizona Partnership tax return (Form 100).
What is the process for dissolving a General Partnership in Arizona?
The process for dissolving a general partnership in Arizona involves filing a Certificate of Dissolution with the Arizona Corporation Commission, as well as settling all of the partnership’s debts and liabilities.
Does a General Partnership in Arizona require a Registered Agent?
Yes, in order to receive important documents, such as legal notices and tax forms, a general partnership in Arizona is required to designate a Registered Agent.
Does a General Partnership in Arizona need to maintain a separate bank account?
Yes, in order to maintain accurate financial records, a general partnership in Arizona should maintain a separate bank account.
Are the partners of a General Partnership in Arizona jointly and severally liable?
Yes, in Arizona, the partners of a general partnership are jointly and severally liable for the partnership’s debts and liabilities.
Is a General Partnership in Arizona required to have a DBA?
Yes, if the partnership is conducting business under a name other than the legal name of the partnership, then a DBA (Doing Business As) must be filed with the Arizona Corporation Commission.
Are the partners of a General Partnership in Arizona required to have a written agreement?
While written agreements are not legally required in Arizona, it is highly recommended that the partners of a general partnership have a written agreement outlining the terms of their partnership.
Are there any restrictions on the formation of a General Partnership in Arizona?
Yes, in Arizona, certain business activities are prohibited from being conducted as a general partnership, such as banking and insurance.
Are the partners of a General Partnership in Arizona personally responsible for the business’s debts and liabilities?
Yes, in Arizona, the partners of a general partnership are personally responsible for the business’s debts and liabilities.
Is a business license required to form a General Partnership in Arizona?
Yes, depending on the type of business the partnership is conducting, the Arizona Corporation Commission may require the partnership to obtain a business license.
Is it possible to convert a General Partnership in Arizona to another type of business entity?
Yes, in Arizona, it is possible to convert a general partnership to a limited liability company (LLC) or a corporation.
Is there a minimum capital contribution required to form a General Partnership in Arizona?
No, there is no minimum capital contribution required to form a general partnership in Arizona.
Are the partners of a General Partnership in Arizona required to register with the Arizona Secretary of State?
No, the partners of a general partnership in Arizona are not required to register with the Arizona Secretary of State.
Is a General Partnership in Arizona required to have specific insurance policies?
Yes, depending on the type of business the partnership is conducting, the Arizona Corporation Commission may require the partnership to obtain specific insurance policies.

Also Read

Why Create General Partnership Arizona is So Important

First and foremost, forming a general partnership allows entrepreneurs to combine their resources, skills, and expertise. By pooling their resources together, partners can leverage their individual strengths to overcome challenges and take advantage of opportunities that may not have been possible on their own. This collaborative effort can lead to greater innovation, efficiency, and ultimately, success for the business.

Moreover, creating a general partnership in Arizona provides entrepreneurs with a sense of security and peace of mind. When starting a business, there are many risks and uncertainties that come into play. By forming a partnership, individuals can distribute the burden of these risks amongst themselves, which can help to alleviate some of the stress and pressure associated with running a business. Additionally, partners can rely on each other for emotional support, guidance, and motivation, which can be invaluable in times of crisis or uncertainty.

Furthermore, creating a general partnership allows entrepreneurs to benefit from the shared responsibility and accountability that comes with working closely with others. Partners must communicate openly, make joint decisions, and hold each other accountable for their actions. This level of collaboration and transparency can promote a strong sense of trust, loyalty, and commitment amongst partners, which can be essential for building a successful and sustainable business over the long term.

In addition, forming a general partnership in Arizona can provide entrepreneurs with certain tax advantages and benefits. Partnerships are typically not subject to double taxation like corporations are, which means that partners can avoid paying taxes on their share of the business profits at both the corporate and individual levels. This can result in significant savings for the business and its partners, allowing them to reinvest more money back into the business or allocate it towards other strategic priorities.

Lastly, creating a general partnership in Arizona can help entrepreneurs to establish a solid legal foundation for their business. Partnerships are governed by a partnership agreement, which outlines the rights, responsibilities, and obligations of each partner. This document can help to prevent misunderstandings, conflicts, and disputes amongst partners, as well as provide a clear roadmap for how the business should be structured and managed. Additionally, partners can benefit from the flexibility and simplicity of the partnership structure, as it generally requires fewer formalities and legal requirements than other business entities.

Overall, creating a general partnership in Arizona is a key step that entrepreneurs should consider when starting a business. The benefits of partnership, including resource pooling, risk sharing, collaboration, transparency, tax advantages, and legal protection, are all important factors that can contribute to the success and longevity of a business. By forming a general partnership, entrepreneurs can set themselves up for a strong foundation that can help propel their business towards future growth, innovation, and prosperity.

Conclusion

In conclusion, starting a general partnership in Arizona 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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