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


Steve Goldstein
Steve Goldstein
Business Formation Expert
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.

All Posts by Steve Goldstein →
Business Formation Expert  |   Fact Checked by Editorial Staff
Last updated: 
LLCBuddy™ offers informative content for educational purposes only, not as a substitute for professional legal or tax advice. We may earn commissions if you use the services we recommend on this site.
At LLCBuddy, we don't just offer information; we provide a curated experience backed by extensive research and expertise. Led by Steve Goldstein, a seasoned expert in the LLC formation sector, our platform is built on years of hands-on experience and a deep understanding of the nuances involved in establishing and running an LLC. We've navigated the intricacies of the industry, sifted through the complexities, and packaged our knowledge into a comprehensive, user-friendly guide. Our commitment is to empower you with reliable, up-to-date, and actionable insights, ensuring you make informed decisions. With LLCBuddy, you're not just getting a tutorial; you're gaining a trustworthy partner for your entrepreneurial journey.
Create a General Partnership in Maryland

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

What is General Partnership In Maryland

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 Maryland

To create a general partnership in Maryland, 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 Maryland

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

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

In Maryland, 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 30 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 Maryland. 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 Maryland. In this way, all business partners will understand what this is about and how to proceed if the mentioned scenarios happen in Maryland.

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

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 Maryland, or a general partnership, or something else.

The application of an EIN in Maryland 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 Maryland

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

Step 5: Obtain Maryland Tax ID Number

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

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 Maryland

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 Maryland

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

Advantages of General Partnership in Maryland

  • 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 Maryland, 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 Maryland 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 Maryland?
A general partnership in Maryland is a business entity that is owned and managed by two or more individuals, who are responsible for the partnership’s debts and obligations.
How do I form a general partnership in Maryland?
To form a general partnership in Maryland, you must file a Certificate of Partnership with the Maryland State Department of Assessments and Taxation.
What documents do I need to create a general partnership in Maryland?
You will need to create a partnership agreement that outlines the division of management, profits, and losses between the partners. You will then need to file a Certificate of Partnership with the Maryland State Department of Assessments and Taxation.
Do I need to register my general partnership in Maryland?
Yes, you must file a Certificate of Partnership with the Maryland State Department of Assessments and Taxation in order to register your partnership.
Is there a fee to register my general partnership in Maryland?
Yes, there is a fee of $100 to register your general partnership in Maryland.
What information is required on the Certificate of Partnership form?
The Certificate of Partnership form requires information such as the legal name of your partnership, the name(s) of your partner(s), and the business address.
Do I need to disclose my personal information to register my general partnership in Maryland?
Yes, the Certificate of Partnership form will require you to include your name and address as well as the names and addresses of your partners.
What is the difference between a general partnership and a limited liability company in Maryland?
A general partnership in Maryland is an unincorporated business entity that does not provide any personal liability protection for its owners. A limited liability company in Maryland, on the other hand, is a separate legal entity that provides its owners with limited liability protection from debts and liabilities.
What are the tax responsibilities of a general partnership in Maryland?
A general partnership in Maryland is not taxed as an entity, but instead the profits and losses of the partnership are passed through to the individual partners based on their ownership percentage. Each partner must then report their share of the profits and losses on their personal income tax return.
Are there any additional requirements for a general partnership in Maryland?
Yes, general partnerships in Maryland are required to file a personal property tax return each year and must obtain a General Business License.
Is there a minimum capital requirement to form a general partnership in Maryland?
No, there is no minimum capital requirement to form a general partnership in Maryland.
Are there any restrictions on the types of businesses that can be formed as a general partnership in Maryland?
No, there are no restrictions on the types of businesses that can be formed as a general partnership in Maryland.
Do I need to have a separate bank account for my general partnership in Maryland?
Yes, it is recommended that you open a separate bank account in the name of your partnership, in order to keep business and personal finances separate.
Are there any restrictions on the activities of a general partnership in Maryland?
Yes, a general partnership in Maryland is required to adhere to the terms of its partnership agreement, and cannot undertake activities outside the scope of its agreement without the consent of all the partners.
What is the liability of each partner in a general partnership in Maryland?
Each partner in a general partnership in Maryland is personally liable for the debts and obligations of the partnership.
What is the process for amending the partnership agreement of a general partnership in Maryland?
The partnership agreement of a general partnership in Maryland can be amended by the mutual agreement of all the partners.
Are there any restrictions on the dissolution of a general partnership in Maryland?
Yes, a general partnership in Maryland must adhere to the terms of its partnership agreement regarding dissolution, and must file the proper forms with the Maryland State Department of Assessments and Taxation when dissolving the partnership.
What is the penalty for failing to file the necessary forms when dissolving a general partnership in Maryland?
Failing to file the necessary forms when dissolving a general partnership in Maryland can result in a penalty of up to $1,000.
What is the filing fee for a Certificate of Partnership in Maryland?
The filing fee for a Certificate of Partnership in Maryland is $100.
How long does it take to form a general partnership in Maryland?
Generally, it takes about 4-6 weeks to form a general partnership in Maryland.
Does Maryland require a partnership agreement for general partnerships?
Yes, a partnership agreement is required in order to form a general partnership in Maryland.
How do I obtain a General Business License in Maryland?
To obtain a General Business License in Maryland, you must submit an application to the Maryland Department of Labor, Licensing, and Regulation.
What is the personal property tax return for a general partnership in Maryland?
The personal property tax return for a general partnership in Maryland is a form that must be filed annually with the Maryland State Department of Assessments and Taxation.
Are there any special considerations when forming a general partnership in a rural area of Maryland?
Yes, if you form a general partnership in a rural area of Maryland, you may be eligible for additional state tax incentives.
Is a general partnership in Maryland required to register with the IRS?
Yes, a general partnership in Maryland is required to register with the IRS and obtain an employer identification number.
Is a general partnership in Maryland required to file a tax return?
Yes, a general partnership in Maryland is required to file a tax return with the IRS each year.
Are there any other requirements for a general partnership in Maryland?
Yes, general partnerships in Maryland must obtain a General Business License and file a personal property tax return each year.
What are the advantages of a general partnership in Maryland?
The advantages of a general partnership in Maryland include the flexibility of the partnership structure, the ability to split profits among the partners, and fewer tax obligations than a corporation.
What are the disadvantages of a general partnership in Maryland?
The disadvantages of a general partnership in Maryland include the personal liability of the partners, the lack of continuity if a partner leaves or dies, and the complexity of winding up and dissolving the partnership.
Are general partners in Maryland liable for debts of the partnership?
Yes, general partners in Maryland are liable for debts of the partnership.
Is a general partnership in Maryland taxed as a separate entity?
No, a general partnership in Maryland is not taxed as a separate entity. Income and losses of the partnership are passed through to the partners, who then pay taxes on the income on their personal tax returns.
Does a general partnership in Maryland need to register with the Maryland State Department of Assessments and Taxation?
Yes, a general partnership in Maryland is required to register with the Maryland State Department of Assessments and Taxation by filing a Certificate of General Partnership.

Also Read

Why Create General Partnership Maryland is So Important

One of the key advantages of creating a general partnership in Maryland is the flexibility it provides to business owners. Unlike other business structures, such as corporations or limited liability companies, general partnerships do not require extensive paperwork or formalities to be established. This simplicity makes general partnerships an attractive option for entrepreneurs who want to quickly set up a business with a partner without being burdened by complex legal requirements.

Additionally, general partnerships in Maryland benefit from pass-through taxation, which means that the profits and losses of the business are not taxed at the entity level. Instead, they are passed through to the individual partners, who report them on their personal tax returns. This can result in significant tax savings for business owners, as they are only taxed on their share of the partnership’s income at their individual tax rates.

Furthermore, general partnerships in Maryland allow partners to combine their skills and expertise to create a stronger and more competitive business. By pooling resources and sharing responsibilities, partners can leverage each other’s strengths to achieve greater success than they could on their own. This collaborative approach can lead to increased innovation, improved decision-making, and a more diversified business portfolio.

General partnerships in Maryland also offer partners the opportunity to share in the risks and rewards of the business equally. Unlike corporations, where shareholders may bear limited financial liability, partners in a general partnership are personally responsible for the debts and obligations of the business. While this may seem like a downside, it can actually be a benefit, as it encourages partners to be fully committed and invested in the success of the business.

In conclusion, creating a general partnership in Maryland is a crucial step for entrepreneurs and business owners looking to collaborate and grow their ventures. General partnerships offer a unique opportunity for individuals to combine their resources, skills, and expertise to work towards a common goal. By establishing a general partnership in Maryland, businesses can benefit from shared responsibilities, risks, and rewards, leading to increased innovation and growth opportunities. If you are considering starting a business with a partner, forming a general partnership in Maryland may be the best choice for you.

Conclusion

In conclusion, starting a general partnership in Maryland 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.

Leave a Comment