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

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

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Why Create General Partnership Arizona is So Important

First and foremost, a general partnership provides a unique opportunity for individuals to pool their resources, skills, and expertise to create a successful business. By combining the strengths of multiple partners, a general partnership can maximize the potential for growth and success. Each partner brings a unique perspective and set of skills to the table, allowing for greater creativity and innovation within the business.

Additionally, forming a general partnership in Arizona allows for shared responsibility and liability among the partners. This means that partners can work together to make decisions and manage the day-to-day operations of the business. By spreading out the responsibilities among multiple partners, the workload can be more evenly distributed, leading to a more harmonious work environment.

Furthermore, a general partnership provides a sense of security and support for its partners. Working alongside other individuals who share a common goal and vision can be incredibly motivating and inspiring. Partners can lean on each other for support during challenging times and celebrate successes together, fostering a strong sense of camaraderie and teamwork.

Another key advantage of creating a general partnership in Arizona is the simplicity and flexibility of the partnership agreement. Unlike other business structures, such as corporations, general partnerships do not require extensive paperwork or formal legal procedures to establish. Partners can set up a general partnership quickly and easily, allowing them to focus on building and growing their business.

In addition, a general partnership offers tax advantages for its partners. Income generated from the business is typically passed through to the individual partners, who then report it on their personal tax returns. This can result in a lower tax burden for partners compared to other business structures such as corporations.

Overall, creating a general partnership in Arizona is important because it provides a platform for individuals to collaborate and share in the success of a business venture. By joining forces with other like-minded individuals, partners can leverage their collective strengths to build a thriving business. The benefits of forming a general partnership, including shared responsibility, support, flexibility, and tax advantages, make it a valuable option for those looking to establish a successful and sustainable business.

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.