Starting a General Partnership in Tennessee 2024: A Comprehensive Guide

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How to Start a General Partnership in Tennessee

One crucial decision you will need to make when starting a general partnership in Tennessee 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 Tennessee, 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 Tennessee, 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 Tennessee

Starting a general partnership in Tennessee 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 Tennessee General Partnership: Step-by-Step

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

Step 1: Choose a Business Name

The first step in starting a general partnership is choosing a business name in Tennessee that reflects your brand. You should search the name through the Tennessee Secretary of State Business Information 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 4 months 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 Tennessee, 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 Tennessee 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 Tennessee 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 Tennessee Secretary of State 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 Tennessee general partnership may be subject to various state and local taxes, such as payroll tax,  income tax, and sales tax permit in Tennessee. Register with the Tennessee Department 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 Tennessee 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 Tennessee 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 Tennessee

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

  • Name Reservation Fee: When reserving a business name for your Tennessee general partnership, you may be required to pay a name reservation fee of $20 online or $20 mail. The fee varies by state, so it is essential to check with the Tennessee Secretary of State‘s office for the specific amount.
  • Filing Fees: Although general partnerships are not required to register with the Tennessee 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 $300. 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 Tennessee business licenses and permits to operate legally in Tennessee. 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 Tennessee Department of Revenue for more information about the necessary licenses and permits and their associated fees.
  • Employer Identification Number (EIN): Obtaining an EIN for your Tennessee 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 Tennessee 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 Tennessee general partnership may involve fees, such as account maintenance fees or initial deposit requirements. Choose the best bank for your business in Tennessee. 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 Tennessee 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 Tennessee, 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 Tennessee and ensure you comply with all necessary regulations.

Benefits of a General Partnership

Tennessee 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 Tennessee 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?
A general partnership is a type of business enterprise in which two or more owners share equal responsibility for the management, profits, and losses of the business.
Can I start a general partnership in Tennessee?
Yes, you can start a general partnership in Tennessee. It is a common type of business structure used in the state.
What are the advantages of a general partnership in Tennessee?
The advantages of a general partnership in Tennessee include shared ownership and decision-making, simplified tax reporting, and flexibility in business operations.
What are the requirements for starting a general partnership in Tennessee?
The requirements for starting a general partnership in Tennessee include selecting a business name, filing a partnership agreement, and obtaining any necessary licenses and permits.
Do I need a business license to start a general partnership in Tennessee?
It depends on the type of business you plan to operate. In some cases, you may need to obtain a business license or permits from state or local agencies.
How do I choose a business name for my general partnership in Tennessee?
You can choose any name that is not already in use by another business in Tennessee. It is also a good idea to conduct a name search or to consult with a business attorney before registering your name.
How do I file a partnership agreement in Tennessee?
A partnership agreement should be written and signed by all partners. You can file the agreement with the Tennessee Secretary of State.
Is there a fee for filing a partnership agreement in Tennessee?
Yes, there is a fee for filing a partnership agreement in Tennessee. The fee is currently $50.
Can I form a general partnership with someone who lives outside of Tennessee?
Yes, you can form a general partnership with someone who lives outside of Tennessee. However, you will need to designate a registered agent in Tennessee to receive legal documents on behalf of the partnership.
Do I need to file for a fictitious name for my general partnership in Tennessee?
It depends on the name you choose for your business. If you use the surnames of the partners in the business name, you do not need to file for a fictitious name. However, if you choose a different name for your business, you may need to file for a fictitious name.
Can I change the business name of my general partnership in Tennessee?
Yes, you can change the business name of your partnership in Tennessee. You should file a statement of partnership amendment with the Tennessee Secretary of State.
Are all partners in a general partnership liable for the debts of the business?
Yes, all partners in a general partnership are jointly and severally liable for the debts and obligations of the business.
Do I need to draft a partnership agreement before starting a general partnership in Tennessee?
No, a partnership agreement is not required by law. However, it is recommended for clarifying the roles and responsibilities of each partner in the business.
What should be included in a partnership agreement for a general partnership in Tennessee?
A partnership agreement should include the purpose of the business, how profits and losses will be shared, how decisions will be made, and how the partnership will be dissolved if necessary.
How do I dissolve a general partnership in Tennessee?
To dissolve a general partnership in Tennessee, you should file a statement of dissolution with the Tennessee Secretary of State. You should also settle any outstanding debts or obligations of the business.
How do I pay taxes as a general partnership in Tennessee?
Each partner in a general partnership reports the business’s income or losses on their personal tax return. The partnership itself does not pay taxes.
What is a registered agent, and do I need one for my general partnership in Tennessee?
A registered agent is a person or entity designated to receive legal notices on behalf of the business. Tennessee law requires all businesses to have a registered agent.
Can a partner in a general partnership work for another company?
Yes, a partner in a general partnership can work for another company. However, they should avoid conflicts of interest and disclose any outside employment to the other partners.
Do I need to obtain any specific licenses or permits for my general partnership in Tennessee?
It depends on the type of business you plan to operate. In some cases, you may need to obtain specific licenses or permits from state or local agencies.
Can I have employees in my general partnership in Tennessee?
Yes, you can have employees in your general partnership in Tennessee. However, you will need to comply with all state and federal employment laws.
Do I need to obtain workers’ compensation insurance for my general partnership in Tennessee?
If you have employees, you will need to obtain workers’ compensation insurance in Tennessee. This will help protect your business from liability in the case of workplace injuries.
Can I convert my general partnership to another type of business structure in Tennessee?
Yes, you can convert your general partnership to another type of business structure in Tennessee. However, this may require filing additional paperwork with the state.
Can I sell my partnership interest in a general partnership in Tennessee?
Yes, you can sell your partnership interest in a general partnership in Tennessee. However, you will need to comply with the terms of the partnership agreement and any relevant state laws.
Can the partners in a general partnership have different levels of decision-making authority?
Yes, the partners in a general partnership can agree to assign different levels of decision-making authority to each member.
Can a general partnership be formed for a specific purpose or project only?
Yes, a general partnership can be formed for a specific purpose or project only. This type of partnership may have a set end date or a specific scope of work.
Can I dissolve a general partnership in Tennessee without the agreement of all partners?
In most cases, all partners in a general partnership must agree to dissolve the business. However, certain circumstances may allow for one partner to petition the court for the dissolution of the partnership.
Can a general partnership own property in Tennessee?
Yes, a general partnership can own property in Tennessee. However, all partners must consent to the ownership of the property.
How can I protect myself from liability in a general partnership in Tennessee?
You can protect yourself from liability in a general partnership by securing insurance coverage, drafting a strong partnership agreement, and consistently following all state and federal laws.
What is a general partnership in Tennessee?
A general partnership is a legal entity formed by two or more people to conduct business in Tennessee.
What are the advantages of starting a general partnership in Tennessee?
Starting a general partnership in Tennessee offers advantages such as ease of formation, tax benefits, and shared liability.
What are the requirements to start a general partnership in Tennessee?
To start a general partnership in Tennessee, you need to name the partnership, register with the Tennessee state government, and obtain necessary licenses and permits.
How can I name my general partnership in Tennessee?
You can name your general partnership in Tennessee by choosing a unique business name that identifies your brand.
Do I need an LLC or corporation to start a general partnership in Tennessee?
No, you don’t need an LLC or corporation to start a general partnership in Tennessee.
Can I register a general partnership in Tennessee online?
Yes, you can register a general partnership in Tennessee online through the Tennessee Secretary of State’s website.
What forms do I need to register a partnership in Tennessee?
You need to file a Certificate of General Partnership with the Tennessee Secretary of State’s office to register a partnership in Tennessee.
Does Tennessee require a partnership agreement for a general partnership?
No, Tennessee does not require a partnership agreement for a general partnership, but it’s advisable to have one.
Can a non-US citizen start a general partnership in Tennessee?
Yes, a non-US citizen can start a general partnership in Tennessee as long as they meet the state’s business requirements.
How much does it cost to start a general partnership in Tennessee?
The cost to start a general partnership in Tennessee varies, but the filing fee for a Certificate of General Partnership is currently $50.
What taxes do general partnerships in Tennessee have to pay?
General partnerships in Tennessee don’t pay taxes as an entity but pass-through profits and losses to the individual partners who report them on their personal income tax returns.
What documents and records do general partnerships in Tennessee need to maintain?
General partnerships in Tennessee are required to maintain financial records, tax records, and partnership agreements.
What is the liability of a general partner in Tennessee?
General partners in Tennessee have unlimited liability for debts and obligations incurred by the partnership.
Can a general partner claim workers’ compensation benefits in Tennessee?
No, general partners in Tennessee are not considered employees of the partnership and don’t qualify for workers’ compensation benefits.
How can I dissolve a general partnership in Tennessee?
You can dissolve a general partnership in Tennessee by filing a Certificate of Cancellation with the Tennessee Secretary of State’s office.
What happens to the assets of a dissolved partnership in Tennessee?
The assets of a dissolved partnership in Tennessee are distributed to the creditors and partners based on the partnership agreement or state law.
Can a general partnership in Tennessee have employees?
Yes, a general partnership in Tennessee can have employees and must adhere to federal and state labor laws.
What risks are involved in starting a general partnership in Tennessee?
Some of the risks of starting a general partnership in Tennessee include shared liability, conflict among partners, and possible legal disputes.
Can I convert my general partnership in Tennessee to an LLC or corporation?
Yes, but it requires filing papers with the state, and the conversion will come with new legal, tax, and operational requirements.
Can a general partnership in Tennessee own real estate?
Yes, a general partnership in Tennessee can own real estate in its name or the individual partners’ names.
Can a general partnership in Tennessee sue or be sued in its name?
Yes, a general partnership in Tennessee can sue or be sued in its name.
Can a general partnership in Tennessee obtain a loan?
Yes, a general partnership in Tennessee can obtain a loan if it’s authorized by all partners, and they are willing to take on shared liability.
Is carryover basis applied to the assets transferred to a general partnership in Tennessee?
No, carryover basis is not applied to the assets transferred to a general partnership in Tennessee.
What types of businesses are suitable for a general partnership in Tennessee?
A general partnership in Tennessee is suitable for small businesses with a few owners, such as law firms, restaurants, and retail shops.
What is the role of a registered agent for a general partnership in Tennessee?
A registered agent represents a general partnership in Tennessee and receives official notices and communication on behalf of the business.
How often do I need to file an annual report for my general partnership in Tennessee?
General partnerships in Tennessee are not required to file annual reports with the State government.
Can a general partnership in Tennessee be sued by one of its employees?
Yes, a general partnership in Tennessee can be sued by one of its employees under certain circumstances, such as workplace discrimination or harassment.
How many partners can a general partnership have in Tennessee?
A general partnership in Tennessee must have at least two partners but can have any number of partners.

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Conclusion

Starting a general partnership in Tennessee 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 Tennessee partnerships. Visit LLCBase for more information about starting a general partnership in Tennessee.

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