What is a general partnership?

A general partnership is an association of two or more persons to carry on as co-owners of a business for profit.

Formation and management of a general partnership

In North Carolina, a general partnership must file a certificate of assumed name with the register of deeds in the county where the principal office is located. No written general partnership agreement is required to form a general partnership, thus partnerships may be formed based on oral agreements and proven by acts and conduct of the parties. If the partners enter into a written agreement, the written agreement will control the partnership with respect to the rights and obligations of the partners except for those matters not addressed in the agreement. If there is no written agreement, or if the written agreement does not address a particular issue, the North Carolina Uniform Partnership Act (“UPA”) controls the rights and obligations of the partners.

What liability do the partners have for partnership debts and obligations?

Partners have unlimited personal liability for obligations of the partnership, and full authority to exercise managerial control over the business unless limited by agreement. Each partner has the apparent authority to act on behalf of the partnership. Unless the person with whom a partner is dealing has knowledge of the partner’s lack of authority, the partner can bind the partnership and all other partners by his actions within the scope of the business. This can occur regardless of whether or not the partner is acting in good faith.

How is the general partnership taxed?

General partnerships have pass through tax treatment meaning that income and loss is passed through to the owners and reflected on the owners’ tax returns. Although the partnership itself does not pay income taxes, the partnerships must file informational returns with the Internal Revenue Service.