Starting a General Partnership in Delaware 2024: A Comprehensive Guide

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How to Start a General Partnership in Delaware

One crucial decision you will need to make when starting a general partnership in Delaware is choosing the right legal structure. A general partnership is popular for many entrepreneurs due to its simplicity and flexibility. As a general partnership, you and your partners can share profits and losses, manage the business together, and avoid the costs and regulations associated with other business structures.

However, like starting an LLC in Delaware, forming a general partnership requires careful planning and attention to legal and regulatory requirements. This guide will provide the information you need to set up a general partnership in Delaware, including choosing a name, registering with the state, and obtaining necessary permits and licenses. At LLCBase, we understand that forming a general partnership can be an overwhelming experience, so we are here to help you every step of the way.

Start a General Partnership

What is a General Partnership

A general partnership is a business structure where two or more people share ownership and management responsibilities. In a general partnership, each partner contributes to the business and shares profits and losses. Unlike a limited liability company (LLC) or a corporation, a general partnership does not offer limited liability protection to its partners. Each partner can be personally liable for the business’s debts and obligations.

Why Start a General Partnership in Delaware

Starting a general partnership in Delaware is a simple and cost-effective way to structure a business, particularly for small enterprises or those with limited resources. General partnerships are relatively easy to set up and maintain, with fewer formalities than other business structures. They also offer more flexibility in management and decision-making, as partners can divide responsibilities and make decisions collectively.

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Start Delaware General Partnership: Step-by-Step

The following is a thorough guide on the steps to start a general partnership in Delaware:

Step 1: Choose a Business Name

The first step in starting a general partnership is choosing a business name in Delaware that reflects your brand. You should search the name through the Delaware Division of Corporations Entity Search‘s database to ensure that the name is not already used. Consider factors such as industry relevance, memorability, and potential trademark conflicts. Once you have chosen a name, you can reserve it for up to 120 days by submitting the required form and paying the name reservation fee.

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Step 2: Draft and Sign a Partnership Agreement

A partnership agreement is a crucial document that outlines the terms and conditions of the general partnership, including each partner’s responsibilities, profit-sharing arrangements, and procedures for resolving disputes. While not legally required in Delaware, it is highly recommended to draft and sign a partnership agreement to avoid potential misunderstandings and conflicts down the line. Consult with an attorney or utilize online legal services to create a comprehensive agreement that covers all aspects of your partnership, such as capital contributions, decision-making processes, and exit strategies.

Step 3: Get an EIN

An EIN, or Employer Identification Number, is a unique nine-digit number the Internal Revenue Service (IRS) assigns for tax purposes. You can obtain an EIN for your Delaware general partnership by applying online through the IRS website or via mail by submitting Form SS-4. This number will be used when filing taxes, securing licenses and permits, and opening a bank account for your business.

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Step 4: Secure Licenses and Permits

Depending on your specific industry and location, your Delaware general partnership may require certain licenses and permits to operate legally. These requirements vary greatly and may include professional licenses, zoning permits, and environmental permits. You can consult the Delaware Division of Corporations for information on required licenses and permits for your business or use the U.S. Small Business Administration’s (SBA) guide to find relevant resources. Ensure all necessary documentation before starting operations to avoid penalties and fines.

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Step 5: Register for State and Local Taxes

Your Delaware general partnership may be subject to various state and local taxes, such as payroll tax,  income tax, and sales tax permit in Delaware. Register with the Delaware Division of Revenue to ensure proper tax compliance and reporting. Additionally, consult with a tax professional or accountant to understand your tax obligations and the best strategies for minimizing your tax burden.

Step 6: Open a Bank Account

Finally, you should open a separate bank account for your Delaware general partnership to separate your personal and business finances. This will make it easier to manage your business’s finances and maintain accurate records for tax purposes. When opening a business bank account, consider factors such as account fees, transaction limits, and access to credit. Research various financial institutions to find the best fit for your partnership’s needs and provide the required documentation to open the account, such as your EIN, partnership agreement, and business licenses.

By following these step-by-step guidelines, you can successfully establish your Delaware general partnership and set your business on the path to success. Remember to stay compliant with all state and federal regulations and consult with professionals when necessary to ensure the smooth operation of your partnership.

Fees for Starting a General Partnership in Delaware

Here are the fees associated when starting a general partnership in Delaware:

  • Name Reservation Fee: When reserving a business name for your Delaware general partnership, you may be required to pay a name reservation fee of Not available online or $75 mail. The fee varies by state, so it is essential to check with the Delaware Secretary of State‘s office for the specific amount.
  • Filing Fees: Although general partnerships are not required to register with the Delaware Secretary of State, some states may require you to file a statement of partnership authority or similar documentation. A filing fee may be associated with this process, which could be around $90. Again, consult the Secretary of State’s office for specific details and fees.
  • Licenses and Permits: Depending on the nature of your general partnership’s business, you may need to obtain various Delaware business licenses and permits to operate legally in Delaware. These can include professional licenses, zoning permits, and environmental permits. Fees for these licenses and permits vary depending on the requirements and the issuing agency. Contact the Delaware Division of Revenue for more information about the necessary licenses and permits and their associated fees.
  • Employer Identification Number (EIN): Obtaining an EIN for your Delaware general partnership is free through the Internal Revenue Service (IRS) website. However, if you use a third-party service to obtain your EIN, they may charge a fee for their assistance.
  • Partnership Agreement: While not legally required, drafting and signing a partnership agreement is highly recommended for Delaware general partnerships. You may consult an attorney to help draft this agreement, which can result in legal fees. Alternatively, you can use online legal services or templates to create a partnership agreement at a lower cost.
  • Bank Account: Opening a bank account for your Delaware general partnership may involve fees, such as account maintenance fees or initial deposit requirements. Choose the best bank for your business in Delaware. Contact your chosen financial institution for information on their specific fees for business accounts.

Types of General Partnerships

Here are the four types of general partnerships in Delaware that you might want to consider:

  1. Professional General Partnership: A professional general partnership is formed by professionals, such as doctors, lawyers, engineers, or architects, who provide services within their respective fields. This type of partnership is ideal for individuals who want to combine their expertise and resources to offer specialized services to clients. A professional general partnership could be the right choice if your business involves a group of professionals working together.
  2. Family General Partnership: A family general partnership is formed by family members who pool their resources to start and manage a business together. This type of partnership is popular among families who want to keep their business operations within the family unit. A family general partnership may be the best option if you plan to start a business with your relatives.
  3. Investment General Partnership: An investment general partnership involves partners pooling their financial resources to invest in stocks, real estate, or other investment opportunities. This type of partnership suits individuals who want to work together to manage their investments and share profits and losses. If your primary objective is to invest together with others, consider forming an investment general partnership.
  4. Retail or Service General Partnership: Retail or service general partnerships are formed by individuals who want to start a retail store, restaurant, or other service-oriented businesses. In this type of partnership, the partners work together to manage the business’s day-to-day operations, share responsibilities, and split profits and losses. If you want to start a business in the retail or service sector with one or more partners, this type of general partnership could be a good fit.

Choosing the Right General Partnership

To choose the right type of general partnership in Delaware, consider the following factors:

  • Business objectives: Identify the primary goals of your business and choose a partnership type that aligns with those objectives.
  • Expertise: Assess the skills and expertise of each partner to determine which type of partnership would benefit from their combined knowledge and experience.
  • Liability: Understand the liability implications of each type of general partnership, as partners in a general partnership can be personally liable for the business’s debts and obligations.
  • Tax implications: Consult with a tax professional to understand the tax implications of each type of partnership and choose the one that offers the most favorable tax treatment for your situation.
  • Regulatory requirements: Research the specific regulatory requirements for your chosen partnership type in Delaware and ensure you comply with all necessary regulations.

Benefits of a General Partnership

Delaware general partnership offers several benefits, including:

  1. Ease of formation and management: General partnerships are relatively simple compared to corporations or limited liability companies (LLCs). A partnership is often formed automatically when two or more people engage in a business without formal documentation. However, it is recommended that partners create a written partnership agreement to outline the terms and conditions of their relationship and protect their interests in case of disputes.
  2. Flexibility in dividing responsibilities and decision-making among partners: General partnerships allow partners to decide how to manage the business, including dividing responsibilities and making important decisions. Each partner can contribute their unique skills and expertise to the operation.
  3. Pass-through taxation: One of the primary benefits of a general partnership in Delaware is pass-through taxation. This means that the partnership itself does not pay taxes on its income. Instead, profits and losses are reported on each partner’s tax return, avoiding the double taxation issue corporations face.
  4. Shared financial responsibility and resources: Partners in a general partnership can pool their financial resources to help fund the business’s start-up costs and ongoing expenses. This can be especially beneficial for small businesses that may not have access to other sources of financing, such as loans or investors.

However, consider that general partnerships do not provide the same level of liability protection as corporations or LLCs. Each partner is personally liable for the debts and obligations of the partnership, which means their personal assets could be at risk in case of legal issues or financial difficulties. Therefore, it is essential to weigh the benefits and risks of a general partnership before deciding on this business structure.

FAQs

What is a general partnership in Delaware?
A general partnership in Delaware is a business entity in which two or more individuals manage the business and share profits and losses in accordance with an agreement.
Who can start a general partnership in Delaware?
Any two or more people can start a general partnership in Delaware.
What are the benefits of starting a general partnership in Delaware?
Some benefits of starting a general partnership in Delaware include a flexible structure, simple management, and the ability to split profits and losses among partners.
What are the disadvantages of starting a general partnership in Delaware?
Some disadvantages of starting a general partnership in Delaware include personal liability for business debts and actions of other partners, and the potentially complicated process of dissolving the partnership.
How do I name my general partnership in Delaware?
The name of your general partnership in Delaware must be distinguishable from other business entities registered in Delaware.
How do I register my general partnership in Delaware?
To register your general partnership in Delaware, you must file a Certificate of Partnership with the Delaware Division of Corporations.
How much does it cost to register a general partnership in Delaware?
The filing fee to register a general partnership in Delaware is $200.
Is there a deadline to register my general partnership in Delaware?
There is no specific deadline to register a general partnership in Delaware, but it is recommended to do so as soon as possible.
Do I need a business license to operate my general partnership in Delaware?
The requirements for a business license in Delaware depend on the specific type of business, location, and other factors. You should consult with the Delaware state government or a legal professional for guidance on obtaining a business license.
Do I need to file annual reports for my general partnership in Delaware?
General partnerships in Delaware do not have to file annual reports with the Delaware Division of Corporations.
Can I change the name of my general partnership in Delaware after registration?
Yes, you can change the name of your general partnership in Delaware by filing an Amendment to Certificate of Partnership.
How can I dissolve my general partnership in Delaware?
To dissolve a general partnership in Delaware, you must file a Statement of Dissolution with the Delaware Division of Corporations.
Can I transfer ownership or partnership interest in my general partnership in Delaware?
Yes, you can transfer ownership or partnership interest in your general partnership in Delaware as long as it is allowed by the partnership agreement and is properly documented.
How can I find a registered agent for my general partnership in Delaware?
You can find a registered agent for your general partnership in Delaware by searching online or in the Delaware Division of Corporations database.
What is the role of a registered agent in Delaware?
The role of a registered agent in Delaware is to receive legal and official correspondence on behalf of the business entity.
How much does a registered agent cost in Delaware?
The cost of a registered agent in Delaware varies and can range from $50 to $250 per year.
Can I be my own registered agent for my general partnership in Delaware?
Yes, you can be your own registered agent for your general partnership in Delaware, as long as you have a physical address in Delaware where legal and official correspondence can be delivered during business hours.
How do I write a partnership agreement for my general partnership in Delaware?
A partnership agreement for a general partnership in Delaware should include the roles and responsibilities of each partner, profit-sharing arrangements, dispute resolution procedures, and other important provisions.
Can I use a template partnership agreement for my general partnership in Delaware?
Using a template partnership agreement for your general partnership in Delaware can be helpful, but it is important to consult with a legal professional to ensure that it complies with Delaware state laws and regulations.
What is the minimum and maximum number of partners allowed for a general partnership in Delaware?
Delaware allows general partnerships to have a minimum of two partners and no maximum limit.
Can I choose a different fiscal year than the calendar year for my general partnership in Delaware?
Yes, you can choose a different fiscal year than the calendar year for your general partnership in Delaware, but you must request permission from the IRS.
What taxes does my general partnership in Delaware have to pay?
General partnerships in Delaware do not pay state income tax, but partners must pay taxes on their share of the profits on their individual tax returns.
Do I need to get a federal employer identification number (EIN) for my general partnership in Delaware?
Generally, general partnerships in Delaware are not required to obtain an EIN unless they have employees.
Can non-residents be partners in a Delaware general partnership?
Yes, non-residents can be partners in a Delaware general partnership.
Are there any restrictions on doing business as a general partnership in Delaware?
Delaware has no restrictions on doing business as a general partnership, but all businesses must comply with state and federal laws.
Can my general partnership in Delaware operate in other states?
Yes, your general partnership in Delaware can operate in other states, but it may be subject to other state laws and regulations.
Can my Delaware general partnership have a different name in other states where we do business?
Yes, your Delaware general partnership can have a different name in other states where you do business, as long as you file a foreign registration in each state.
What is a foreign registration in Delaware?
A foreign registration in Delaware is the process of registering your out-of-state business entity to do business in Delaware.
Why should I start a general partnership in Delaware?
Delaware has a favorable business climate and is known for its corporate-friendly laws, making it an attractive location for businesses.
How do I register a general partnership in Delaware?
To register a general partnership in Delaware, you need to file a Certificate of Partnership with the Delaware Division of Corporations.
What information do I need to provide to register a general partnership in Delaware?
You need to provide the name of the partnership, names and addresses of the partners, the purpose of the partnership, and the duration of the partnership.
Can I use a business name that’s already taken by another company in Delaware?
No, you can’t use a name that’s already taken by another company in Delaware. You can file to reserve a name for up to 120 days before registering your partnership.
Is there a minimum or maximum number of partners required to start a general partnership in Delaware?
No, there is no minimum or maximum number of partners required to start a general partnership in Delaware.
What is a partnership agreement?
A partnership agreement is a legal document that spells out the rights and obligations of each partner and governs the operation of the partnership.
Do I need a partnership agreement to start a general partnership in Delaware?
Delaware law does not require a partnership agreement for a general partnership, but it is highly recommended to avoid future disputes.
How do I dissolve a general partnership in Delaware?
To dissolve a general partnership in Delaware, you need to file a Certificate of Dissolution with the Delaware Division of Corporations.
Can a general partnership in Delaware be converted to a Limited Partnership (LP)?
Yes, a general partnership in Delaware can be converted to a limited partnership (LP). You would need to file a Certificate of Conversion with the Delaware Division of Corporations.
Does Delaware recognize foreign general partnerships?
Yes, Delaware does recognize foreign general partnerships.
What is the filing fee to register a general partnership in Delaware?
The filing fee to register a general partnership in Delaware is $200.
Can I register a general partnership online in Delaware?
Yes, you can register a general partnership online in Delaware through the Delaware Division of Corporations website.
How long does it take to register a general partnership in Delaware?
It takes approximately 2-3 business days for the Delaware Division of Corporations to process a Certificate of Partnership filing.
What type of taxes does a general partnership in Delaware have to pay?
A general partnership in Delaware is not subject to a state income tax. Partners are required to report their distributive share of the partnership income on their individual tax returns.
Does a general partnership in Delaware need to register for a state sales tax?
Yes, a general partnership in Delaware is required to register for a state sales tax if it sells taxable goods or services.
Can a non-US resident be a partner in a general partnership in Delaware?
Yes, a non-US resident can be a partner in a general partnership in Delaware.
Do partners in a general partnership in Delaware have limited liability?
No, partners in a general partnership in Delaware are personally liable for the debts and obligations of the partnership.
Can a general partnership in Delaware have an office in another state?
Yes, a general partnership in Delaware can have an office in another state.
Can partners in a Delaware registered general partnership be located in different states?
Yes, partners in a Delaware registered general partnership can be located in different states.
Can a general partnership in Delaware be registered as a not-for-profit entity?
No, a general partnership cannot be registered as a not-for-profit entity in Delaware.
Can a general partnership in Delaware operate under a DBA (Doing Business As) or trade name?
Yes, a general partnership in Delaware can operate under a DBA or trade name after registering it with the Delaware Division of Corporations.
Can a partner in a Delaware registered general partnership transfer their interest to someone else?
Yes, a partner in a Delaware registered general partnership can transfer their interest to someone else, subject to the terms of the partnership agreement.
What is the Uniform Partnership Act (UPA) and how does it apply to general partnerships in Delaware?
The Uniform Partnership Act (UPA) is a uniform law that governs the formation, operation, and dissolution of general partnerships in many US states, including Delaware.
Can a general partnership in Delaware register as an S corporation or C corporation?
No, a general partnership in Delaware cannot register as an S corporation or C corporation as those are different legal entities.
Is it mandatory to have a registered agent to start a general partnership in Delaware?
Yes, a general partnership in Delaware is required to have a registered agent with a physical address in Delaware.
What is the role of a registered agent for a general partnership in Delaware?
A registered agent for a general partnership in Delaware is responsible for receiving legal and tax documents on behalf of the partnership.
Can a general partnership in Delaware apply for a business line of credit or loan?
Yes, a general partnership in Delaware can apply for a business line of credit or loan.
Who can provide legal assistance for starting a general partnership in Delaware?
An attorney licensed to practice law in Delaware can provide legal assistance for starting a general partnership in Delaware.

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Conclusion

Starting a general partnership in Delaware is a straightforward process that offers numerous benefits for entrepreneurs. By following these steps and staying compliant with all necessary regulations, you can set your business up for success and join the ranks of thriving Delaware partnerships. Visit LLCBase for more information about starting a general partnership in Delaware.

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