By law, a general partnership is when one individual and at least one other person agree to form a partnership and conduct business as a partnership. There are no filings with the Secretary of State; the partnership simply exists as its own entity by the will of the partners.
Partnerships are a recognized entity choice in Texas that are generally, the easiest to form. In fact, there are instances where even if you did not formally agree with another person to form a partnership, that partnership may be implied by law and legally exist even without an agreement between the partners. There is also a great deal of flexibility within a general partnership: partners can create all kinds of arrangements as to how profits and losses will be shared, interest transfers, and operations management. This kind of informality can be very costly though.
General Partnerships Are A Liability Nightmare
Because there are very few corporate formalities required for partnerships, they become a popular choice for those individuals looking to hit the ground running with an idea or business venture. But, the lack of formality also lends itself to the risks of liability beyond what you thought you signed up for. In a General Partnership, each partner is jointly and severally liable for the debts of the other partners in the partnership. So, where two or more physicians may form a general partnership, the malpractice liabilities of one physician can be imparted on the other physicians in the group (this group of physicians may be more suited to a Professional Limited Liability Company). So, when you are thinking about forming a partnership, it may be worth it to thoroughly contemplate the risks that you are taking on versus the advantages of the flexibility and informality.
If you are thinking about starting a General Partnership in Texas or want to learn more about entity choices, San Antonio Small Business Attorney Nathaniel Gilbert can help answer your questions and get you pointed in the right direction. For more on Business Organizations in Texas, Click Here. To get in touch with Nate directly, Click Here.
