The most common business structures in Florida are Sole Proprietorship, General Partnership (GP), Limited Partnership (LP), Limited Liability Company (LLC) and Corporation.
The business structure you choose when forming a company determines everything from your day-to-day operations, ability to raise money, the amount you pay in taxes and how much of your personal assets are at risk.
Partnerships can be formed with a handshake, and often they are. A partnership is an association of two or more people named partners who engage in a business venture for profit as co-owners.
In Florida, there are four types of partnerships: general partnership (GP), limited partnership, limited liability partnership and foreign limited liability partnership.
The most common structures are the general partnership and the limited partnership, with the general partnership being the most informal type of partnership arrangement. Without exploring the details, it is important to mention that a joint venture is a type of partnership and is the same as a general partnership except that the partnership only exists for a specified period of time or for a specific project.
Do you need any formalities to start a partnership in Florida?
For a business relationship to become a general partnership, Florida law does not impose any formalities or written agreements and does not require the general partnership to register with the state or obtain a state business license.
However, a general partnership business has the option to have a written partnership agreement and register with the State of Florida, if it decides so. And while these documents and fillings are not required, it is advisable for the business partners to have a written Partnership Agreement and register with the State of Florida in order to prevent disputes about profits, distributions and direction of the firm.
In other words, two or more business partners can agree to form a general partnership and do not need to have or file anything in writing with the state for the partnership to form. However, if the business partners choose so, they can have a written Partnership Agreement that is satisfactory and executed by all the partners and file a General Partnership Registration Statement form with the Division of Corporations of the State of Florida. The Registration Statement is a prerequisite for filing other statements with the state such as Statement of Authority, Statement of Dissolution, etc. To access the forms, visit https://dos.myflorida.com/sunbiz/forms/partnerships/.
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How does a general partnership function?
A general partnership exists on its own as a separate and distinct business entity from its owners. The general partnership may own property in its own name and sue and be sued in the partnership’s name. All business partners in a general partnership have the right to manage the business of the partnership. In the absence of a Partnership Agreement, the business partners share equally profits and losses, regardless of their contribution to the partnership.
Partners in a general partnership are personally liable for the business obligations and actions of the partnership. In practice, it means that if the partnership cannot afford to pay creditors or the business does not succeed, each business partner is responsible to pay the debts, and the creditors can seize the personal assets of the partners such as bank accounts, cars, etc. to pay off all of the partnership’s debts.
In the absence of a Partnership Agreement, a general partnership ends when one partner gives notice of his or her express will to leave the partnership. However, a Partnership Agreement can outline the procedure through which the partnership will dissolve, together with procedures for making major business decisions, how profits and losses will be split, how much control each partner maintains and how a partner can dissociate.
What are the advantages and disadvantages of a general partnership in Florida?
To summarize, the advantages and disadvantages of a general partnership business in Florida are:
- Easy registration
- Low cost
- Simple to file taxes
- Allows for at least 2 partners (owners)
- Partners are personally liable for debts and lawsuits
- Partners are subject to the actions of other partners and do not have full control
- Limited life – one partner leaving can end the partnership
- Difficult to raise money
Before registering your business with the State of Florida or any other State, choose a business structure that gives you the right balance of legal protections and benefits. Contact us or schedule a consultation with your business formation attorney in Miami, Florida USA to register a partnership or determine if the general partnership structure is right for you.
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