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


Steve Bennett
Steve Bennett
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Create a General Partnership in Delaware

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

What is General Partnership In Delaware

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 Delaware

To create a general partnership in Delaware, 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 Delaware

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

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

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

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

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 Delaware, or a general partnership, or something else.

The application of an EIN in Delaware 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 Delaware

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

Step 5: Obtain Delaware Tax ID Number

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

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 Delaware

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 Delaware

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

Advantages of General Partnership in Delaware

  • 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 Delaware, 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 Delaware 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

How do I form a general partnership in Delaware?
You will need to file a Certificate of Limited Partnership with the Delaware Division of Corporations. This document must include the name and address of each partner, the name of the partnership, and a statement of the business purpose of the partnership. Once the document is filed and the filing fee is paid, the partnership will be officially formed.
Is a general partnership in Delaware subject to any taxes?
Yes. General partnerships in Delaware must pay income taxes on their earnings, as well as any applicable withholding taxes.
Does a general partnership in Delaware need to register with the state?
Yes. A general partnership in Delaware must register with the Delaware Division of Corporations by filing a Certificate of Limited Partnership.
What are the requirements for forming a general partnership in Delaware?
To form a general partnership in Delaware, you must file a Certificate of Limited Partnership with the Delaware Division of Corporations. This document must include the name and address of each partner, the name of the partnership, and a statement of the business purpose of the partnership.
What documents are required to form a general partnership in Delaware?
To form a general partnership in Delaware, you will need to file a Certificate of Limited Partnership with the Delaware Division of Corporations. This document must include the name and address of each partner, the name of the partnership, and a statement of the business purpose of the partnership.
Are there any ongoing requirements for a general partnership in Delaware?
Yes. General partnerships in Delaware must file an annual report with the Delaware Division of Corporations each year, and must also keep up with any ongoing filing requirements.
What are the liability protections for general partnerships in Delaware?
General partners in Delaware are personally liable for all debts and liabilities of the partnership. However, limited partners are only liable for the amount of their capital contributions.
Are there any specific rules for general partnerships in Delaware?
Yes. Delaware has specific rules and regulations that govern the formation and operation of general partnerships in the state.
Does a general partnership in Delaware need to have an operating agreement?
Yes. In order to have a legally valid general partnership in Delaware, the partners must have an operating agreement that outlines the rights and responsibilities of each partner.
Are there any restrictions on the activities of a general partnership in Delaware?
Yes. Partnerships in Delaware are limited to conducting only activities that are in the furtherance of the partnership business and purpose.
Does a general partnership in Delaware need to have a registered office?
Yes. A general partnership in Delaware must have a registered office in the state in order to comply with state regulations.
Does a general partnership in Delaware require any licenses or permits?
It depends. Depending on the type of business activities the partnership will be engaging in, you may need to obtain certain licenses or permits from the state of Delaware.
Is there a minimum or maximum number of partners for a general partnership in Delaware?
No. There is no minimum or maximum number of partners for a general partnership in Delaware.
Are there any restrictions on who can be a partner in a general partnership in Delaware?
Yes. All partners must be over the age of 18 and must be individuals or registered entities.
Are there any restrictions on the name of a general partnership in Delaware?
Yes. The name of a general partnership in Delaware must not be similar to any existing business name registered with the Delaware Division of Corporations.
Does a general partnership in Delaware need to have a bank account?
Yes. A general partnership in Delaware must have a bank account in order to receive payments and pay bills.
Is there a formal process for dissolving a general partnership in Delaware?
Yes. To officially dissolve a general partnership in Delaware, the partners must file a Certificate of Cancellation with the Delaware Division of Corporations.
Are there any taxes owed when dissolving a general partnership in Delaware?
Yes. Partnerships in Delaware must pay taxes on any income earned in the year prior to dissolution.
Is a general partnership in Delaware required to hold annual meetings?
No. General partnerships in Delaware are not required to hold annual meetings.
Does a general partnership in Delaware need to have an EIN?
Yes. A general partnership in Delaware must obtain an Employer Identification Number (EIN) in order to open a bank account and file taxes.
Is there a fee to file a general partnership in Delaware?
Yes. The filing fee for a general partnership in Delaware is $90.
What is the time frame for forming a general partnership in Delaware?
The time frame for filing a Certificate of Limited Partnership with the Delaware Division of Corporations is typically 1-3 business days.
Is there a minimum capital contribution for a general partnership in Delaware?
No. There is no minimum capital contribution for a general partnership in Delaware.
Does a general partnership in Delaware need to have a business plan?
No. A business plan is not required to form a general partnership in Delaware.
Does a general partnership in Delaware need to have a written agreement between the partners?
Yes. A written agreement is necessary for all general partnerships in Delaware.
Is there a public record for general partnerships in Delaware?
Yes. All general partnerships in Delaware must file a Certificate of Limited Partnership with the Delaware Division of Corporations, which is a public record.
Is there a fee to dissolve a general partnership in Delaware?
Yes. The filing fee to dissolve a general partnership in Delaware is $50.
How is income distributed among partners in a general partnership in Delaware?
Income will be distributed among partners in a general partnership in Delaware according to the terms of the partnership agreement.
Are there any restrictions on how profit is distributed among partners in a general partnership in Delaware?
Yes. Profit must be distributed among partners in a general partnership in Delaware according to the terms of the partnership agreement.
Is a general partnership in Delaware required to have insurance?
No. A general partnership in Delaware is not required to have insurance. However, it is recommended that the partners consider obtaining insurance to protect their interests.

Also Read

Why Create General Partnership Delaware is So Important

Choosing to create a general partnership in Delaware, in particular, can offer numerous advantages for entrepreneurs looking to establish a new business. Delaware is known for its business-friendly environment, with a well-established legal framework that is favorable to corporations and other business entities. By creating a general partnership in Delaware, business owners can take advantage of the state’s business-friendly laws and regulations, which can help to streamline the process of setting up and operating the partnership.

One of the key benefits of creating a general partnership in Delaware is the state’s minimal compliance requirements. Delaware is known for its simple and straightforward process for forming a general partnership, which can save business owners time and money when compared to other states with more complex regulatory requirements. Additionally, Delaware does not have a state sales tax, which can further reduce the administrative burden on businesses operating in the state.

Another advantage of creating a general partnership in Delaware is the state’s well-established legal system. Delaware has a separate court, the Court of Chancery, that handles business disputes and other corporate matters. This specialized court has a reputation for expertise in business law and a streamlined process for resolving disputes, which can provide a more efficient and predictable legal environment for businesses operating in the state.

In addition to these benefits, creating a general partnership in Delaware can also offer tax advantages for business owners. Delaware does not impose a state income tax on partnerships, which can result in significant tax savings for partners. Furthermore, Delaware allows general partnerships to customize their partnership agreements to better suit their specific needs and objectives, providing greater flexibility and control for business owners.

Overall, creating a general partnership in Delaware can be a strategic decision for entrepreneurs looking to build a successful business. The state’s business-friendly environment, minimal compliance requirements, well-established legal system, and tax advantages can provide significant benefits for business owners in terms of efficiency, cost savings, and legal protection. By choosing to create a general partnership in Delaware, entrepreneurs can set themselves up for success and pave the way for a prosperous future for their business.

Conclusion

In conclusion, starting a general partnership in Delaware 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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