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


Steve Goldstein
Steve Goldstein
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Create a General Partnership in Tennessee

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

What is General Partnership In Tennessee

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 Tennessee

To create a general partnership in Tennessee, 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 Tennessee

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

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

In Tennessee, 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 4 months. 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 Tennessee. 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 Tennessee. In this way, all business partners will understand what this is about and how to proceed if the mentioned scenarios happen in Tennessee.

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

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 Tennessee, or a general partnership, or something else.

The application of an EIN in Tennessee 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 Tennessee

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

Step 5: Obtain Tennessee Tax ID Number

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

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 Tennessee

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 Tennessee

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

Advantages of General Partnership in Tennessee

  • 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 Tennessee, 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 Tennessee 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 Tennessee?
A general partnership in Tennessee is a business entity formed between two or more persons or entities. The partners share the profits and losses of the business, and all contribute to the management, operation and liability of the business.
What are the legal requirements for forming a general partnership in Tennessee?
Partnerships in Tennessee require two or more persons or entities to register with the Tennessee Secretary of State to form a general partnership. The partnership must also have a registered agent in the state and file a registration statement with the Secretary of State.
What are the tax implications of forming a general partnership in Tennessee?
A general partnership in Tennessee is a pass-through entity, meaning that all profits and losses pass through to the individual partners and are subject to taxation. The partnership itself is not taxed.
What are the liability implications of forming a general partnership in Tennessee?
Each partner in a general partnership in Tennessee has unlimited personal liability for the debts and obligations of the partnership. This means that each partner is liable for any debts or obligations that the partnership incurs.
Is there a minimum capital requirement for forming a general partnership in Tennessee?
No, there is no minimum capital requirement for forming a general partnership in Tennessee.
What are the management requirements for a general partnership in Tennessee?
Partners in a general partnership in Tennessee are jointly responsible for the management and operation of the business, and each partner is authorized to act on behalf of the partnership.
What are the recordkeeping requirements for a general partnership in Tennessee?
Partners in a general partnership in Tennessee should keep records of their contributions, profits and losses, and other transactions related to the business.
Are there any restrictions on the activities of a general partnership in Tennessee?
Generally speaking, there are no restrictions on the activities of a general partnership in Tennessee. However, some activities may require a special license or permit.
What are the annual requirements for a general partnership in Tennessee?
Partners in a general partnership in Tennessee must file an annual report with the Tennessee Secretary of State. The annual report must include the names and addresses of all partners, the names of the partnership’s registered agents, and any changes in the partnership’s name or address.
Can a general partnership in Tennessee enter into contracts?
Yes, a general partnership in Tennessee can enter into contracts. All partners must agree to any contracts the partnership enters into.
Can a general partnership in Tennessee sue or be sued?
Yes, a general partnership in Tennessee can sue or be sued. All partners must agree to any lawsuit the partnership files or is party to.
What is the governing law for general partnerships in Tennessee?
The governing law for general partnerships in Tennessee is the Tennessee Revised Uniform Partnership Act (TRUPA).
What are the dissolution requirements for a general partnership in Tennessee?
A general partnership in Tennessee can be dissolved by filing an application with the Secretary of State. The partnership must also notify all creditors of the dissolution.
Is a general partnership in Tennessee required to have a business bank account?
Generally speaking, no. However, it is recommended that the partners open a separate business bank account in order to maintain proper business records.
Does a general partnership in Tennessee need an operating agreement?
Yes, it is recommended that partners in a general partnership in Tennessee sign an operating agreement. The operating agreement should specify how profits and losses are divided, how the business is managed, and how disputes are resolved.
Is there a fee to form a general partnership in Tennessee?
Yes, there is a filing fee to register a general partnership in Tennessee. The filing fee is currently $50.
Does a general partnership in Tennessee need to register with the IRS?
Yes, a general partnership in Tennessee must register with the IRS and obtain an employer identification number (EIN).
How long does it take to form a general partnership in Tennessee?
It typically takes about two weeks to form a general partnership in Tennessee.
Is a general partnership in Tennessee required to have a registered agent?
Yes, a general partnership in Tennessee must have a registered agent in the state. The registered agent is responsible for receiving service of process on behalf of the partnership.
What is the difference between a general partnership and a limited partnership in Tennessee?
A general partnership in Tennessee is a business entity formed between two or more persons or entities. All partners share the profits and losses of the business, and are jointly responsible for the management and operation of the business. In contrast, a limited partnership in Tennessee is a business entity formed between two or more persons or entities, but only one partner is liable for the debts and obligations of the partnership.
Are there any restrictions on the name of a general partnership in Tennessee?
Yes, the name of a general partnership in Tennessee may not be the same as the name of another registered entity in the state. The name must also include the words “general partnership” or “GP”.
Is there a fee to renew a general partnership in Tennessee?
Yes, there is a fee to renew a general partnership in Tennessee. The renewal fee is currently $50.
Can a foreign entity form a general partnership in Tennessee?
Yes, a foreign entity can form a general partnership in Tennessee. The foreign entity must register with the Tennessee Secretary of State and appoint a registered agent in the state.
How can a general partnership in Tennessee be dissolved?
A general partnership in Tennessee can be dissolved by filing an application with the Tennessee Secretary of State. The partnership must also notify all creditors of the dissolution.
Can a general partnership in Tennessee be dissolved without the agreement of all partners?
No, a general partnership in Tennessee cannot be dissolved without the agreement of all partners.
What documents are required to form a general partnership in Tennessee?
Partnerships in Tennessee require two or more persons or entities to register with the Tennessee Secretary of State to form a general partnership. The partnership must also have a registered agent in the state and file a registration statement with the Secretary of State.
Can a general partnership in Tennessee hire employees?
Yes, a general partnership in Tennessee can hire employees. The partnership must comply with all applicable federal and state employment laws.
What is the process for registering a general partnership in Tennessee?
The process for registering a general partnership in Tennessee involves filing a registration statement with the Tennessee Secretary of State. The registration statement must include the names and addresses of all partners, the names of the partnership’s registered agents, and any changes in the partnership’s name or address.
What are the benefits of forming a general partnership in Tennessee?
Some of the benefits of forming a general partnership in Tennessee include the ease of formation and administration, as well as the ability to pass through profits and losses to the individual partners.
Is a general partnership in Tennessee required to have a written operating agreement?
Although not required, it is highly recommended that partners in a general partnership in Tennessee sign a written operating agreement. The operating agreement should specify how profits and losses are divided, how the business is managed, and how disputes are resolved.

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Why Create General Partnership Tennessee is So Important

One of the main reasons why creating a general partnership in Tennessee is so crucial is the shared management and decision-making it offers. When two or more individuals come together to form a general partnership, they can combine their skills, expertise, and resources to effectively run the business. This collaborative approach allows partners to leverage each other’s strengths and capabilities, leading to better decision-making and problem-solving.

Additionally, a general partnership in Tennessee provides flexibility and simplicity when it comes to the management of the business. Partners have the freedom to allocate responsibilities based on their areas of expertise and interest, which can help streamline operations and improve overall efficiency. This flexibility also extends to the freedom partners have in setting up the partnership agreement, outlining the terms of their relationship, profit-sharing arrangements, and decision-making processes.

From a legal standpoint, creating a general partnership in Tennessee is relatively straightforward and cost-effective. There are no formal filing requirements or complex regulations to comply with, making it an attractive option for startups and small businesses. Partners can easily establish the partnership by drafting a partnership agreement outlining the terms of their relationship, which can help prevent misunderstandings and conflicts down the road.

Moreover, forming a general partnership in Tennessee can provide partners with access to a wider pool of resources and financing opportunities. By combining their individual assets and investments, partners can leverage their collective financial strength to secure loans, attract investors, and fund business expansion. This shared financial responsibility can help mitigate risks and improve the overall stability of the business.

Another key advantage of creating a general partnership in Tennessee is the favorable tax treatment it offers. Unlike other business entities like corporations, general partnerships are not subject to double taxation. Instead, partners report their share of the partnership’s profits and losses on their individual tax returns, resulting in a simpler and more tax-efficient structure.

Additionally, general partnerships in Tennessee enjoy pass-through taxation, meaning that the partnership itself does not pay taxes on its income. Instead, profits and losses are allocated to the partners, who are then responsible for reporting and paying taxes on their share. This tax transparency can help partners better understand and manage their tax liabilities, leading to potential tax savings and financial benefits.

In conclusion, creating a general partnership in Tennessee is a critical step for entrepreneurs and business owners looking to collaborate, grow, and succeed in today’s competitive market. By harnessing the benefits of shared management, flexibility, simplicity, legal ease, financial advantages, and favorable tax treatment, partners can establish a strong foundation for their business ventures and unlock new opportunities for long-term success.

Conclusion

In conclusion, starting a general partnership in Tennessee 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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