The legal form of a general partnership is created when there is an association of two or more persons, or other business entities, who become known as the general partners. The association of parties may be informal or their association may be formalized with a document known as a partnership agreement. While a partnership agreement is not required, it encourages specificity.
In a general partnership:
- Parties carry on all their trade and business for the joint benefit and profit of all the parties concerned.
- Invested capital may be limited or not.
- Contributions thereto may be equal or not.
- Organization benefits from broader management base and financial strength.
- Death or withdrawal of any general partner dissolves the general partnership.
Each general partner has a right:
- To participate in partnership management. The issue of control can be addressed with a partnership agreement.
- To share in the profits of the partnership.
Each general partner has joint and several liability for obligations of the general partnership. That means that each general partner has the potential of being personally indebted for each obligation of the general partnership. One general partner's actions can make another general partner personally liable on a contract. Similarly, the actions or torts of one general partner arising in the ordinary course of the partnership's business can result in another general partner being personally liable on a contract or in a lawsuit.
General partnerships file a partnership tax return but do not pay taxes; they are "pass-through" entities. Each general partner takes into account their share of general partnership income, losses, deductions and credits and reports them on the partner's tax return.
General partnerships do not require any formal organizational meeting or state filing requirements to come into existence. A partnership may choose to file statements with the Secretary of State according to NDCC, Chapter 45-13. A general partnership must obtain appropriate licenses and register a Partnership Fictitious Name Certificate with the Secretary of State if a fictitious name is employed.
Partnership Fictitious Name Certificate
A partnership using a fictitious name in the transaction of business, must file a Partnership Fictitious Name Certificate with the Secretary of State. A fictitious name is a name assumed by a general partnership that does not include:
- The true name of each organizational partner;
- The first name and surname of each partner; or
- The surname of each partner, repeating a surname if more than one partner has the same surname.
The registration of the Partnership Fictitious Name Certificate:
- Affords exclusive right to that name in the State of North Dakota. No other business may file a name with the Secretary of State that is the same as, or deceptively similar, to any registered name.
- Establishes a public record from which the names of the partners can be identified.