How to Form a General Partnership in Delaware

Steps to Form a General Partnership in Delaware:

Step 1: Determine if a General Partnership Is Right for You

General partnerships are popular due to their simplicity in formation. There's no legal obligation to register a general partnership in Delaware before conducting business. Partners typically share in decision-making and profit division equally. However, you should weigh the pros and cons to decide if this structure suits your needs.

Pros:

• Easy to establish.
• Low maintenance.
• Simple distribution of profits and losses.
• Pass-through taxation, with income taxed at the individual level.

Cons:

• Partners are jointly and severally liable for the partnership's legal and financial obligations.
• Strict rules for transferring business ownership.
• Limited options for raising capital compared to corporations.

While we can provide general insights into partnership pros and cons, consulting a legal or financial advisor is crucial for tailored advice based on your unique circumstances.

‍Step 2: Choose a Business Name

Selecting a business name is one of the initial steps in starting any business. In Delaware, it's assumed that the partnership will use the partners' first and last names. You can include specific words like "Company," "Association," or others if they are suitable for your business. If you wish to use a different name, you must file for a "doing business as" (DBA) or fictitious name.

Step 3: File a DBA Name (if necessary)

If you intend to use a business name that doesn't include the partners' names, you'll need to register a DBA, fictitious, or trade name. Ensure your chosen name is unique, complete a Registration Certificate, and file it with the Office of the Prothonotary in each county where you plan to transact business. You can also reserve a name with the Secretary of State for 120 days if you haven't finalized your name.

Step 4: Draft and Sign a Partnership Agreement

It's essential to create and sign a partnership agreement when starting your general partnership. This agreement outlines conflict resolution, partner dissociation rules, dissolution conditions, and individual partners' rights. Most partnership agreements are written and signed by the founding partners, but oral or implied agreements can also have the same effect.

Step 5: Obtain Licenses, Permits, and Clearances

While there's no formal requirement to register your general partnership with the Delaware Secretary of State before conducting business, you must obtain a Delaware business license from the Division of Revenue. Depending on your location and industry, you may also need local business licenses or industry-specific permits.

Step 6: Get an Employer Identification Number (EIN)

Partnerships require an Employer Identification Number (EIN) from the IRS for federal tax purposes. Applying for an EIN is essential to identify your business when paying federal taxes and reporting wage withholding.

Step 7: Get Delaware State Tax Identification Numbers

Depending on your business type, you may be responsible for various state taxes in Delaware, including wage withholding and industry-specific taxes. Register online using the Delaware Business One Stop, which connects you to relevant state agencies.

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Next Steps:

After obtaining licenses and an EIN, open a business bank account to separate business income from personal finances. If you have intellectual property to protect, consider filing for a U.S. Patent or Trademark. Additionally, assess your insurance needs to find the right coverage for your business.

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How We Can Assist:

Initiating a general partnership in Delaware is relatively simple. Planning for dispute resolution and understanding licensing requirements can save time in the long run. Our comprehensive suite of business development and maintenance services can assist you in meeting many of your business obligations. If you prefer a more formal business entity, we offer Formation Services for Delaware LLCs and corporations.

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Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. Seek the counsel of a licensed professional for specific questions related to these topics.