To form a business partnership, decide which type fits your situation (general, limited, or limited liability), file a certificate with your state if you’re forming an LP or LLP, draft a written partnership agreement, get a federal Employer Identification Number, obtain any licenses your industry requires, and set up your tax and insurance obligations before you start operating. A general partnership needs no state filing to exist, which is both its convenience and its trap: the moment two people start running a business together for profit, they’ve formed one and taken on personal liability for it.
Pick the Partnership Type
Three structures cover almost every partnership formed in the United States, each governed by a version of the Uniform Partnership Act your state has adopted.
- General partnership (GP). Two or more co-owners running a business for profit. No state registration required. Every partner shares management and is personally liable for all partnership debts.
- Limited partnership (LP). At least one general partner who manages the business and one or more limited partners who contribute capital but stay out of daily operations. Requires a certificate of limited partnership filed with the state.
- Limited liability partnership (LLP). Common among lawyers, accountants, and architects. Partners generally aren’t liable for another partner’s malpractice or the partnership’s ordinary debts. Requires state registration, and some states restrict LLPs to licensed professionals.
The liability differences are the reason to choose carefully. In a GP, partners are jointly and severally liable, meaning a creditor can pursue any single partner for the entire debt. Your home, savings, and personal accounts are on the line for what your partner signs or does in the course of partnership business. A partner joining an existing GP isn’t personally liable for debts incurred before they arrived, but they’re on the hook for everything after.
Limited partners in an LP have liability capped at what they invested, but only if they stay out of management. Cross the line into day-to-day decisions and a court can treat you as a general partner, wiping out the protection. In an LLP, the shield covers you against another partner’s wrongful acts and general partnership debts, but not your own negligence or anything you personally guarantee. And that shield only exists while the state registration is active. Let it lapse and it’s gone.
Register With the State
General Partnerships
Most states don’t require a GP to file formation documents. There’s no certificate to submit, no approval to wait for. If you operate under any name other than the partners’ legal surnames, though, you’ll usually need to file a fictitious name certificate (a DBA, or “doing business as”) with a state or county office. Some states also require you to publish notice of the business in a local newspaper.
No state filing doesn’t mean no paperwork. A GP still needs an EIN, business licenses, and a written agreement. Treating the absence of a formation filing as permission to skip everything else is where new partnerships get into trouble.
Limited Partnerships and LLPs
LPs and LLPs must file with the Secretary of State (or equivalent) in the state where the business will be organized. For an LP that filing is a certificate of limited partnership. For an LLP it’s typically a statement of qualification or certificate of limited liability partnership.
The certificate generally asks for:
- A partnership name that’s distinguishable from names already registered in the state. Most states require LP names to include “Limited Partnership” or an abbreviation, and LLP names to include “Limited Liability Partnership” or similar.1U.S. Small Business Administration. Choose Your Business Name
- A registered agent with a physical street address in the state to receive legal notices. A P.O. box won’t qualify.
- Names and addresses of each general partner (for LPs) or all partners (for LLPs).
- A principal office address where the partnership keeps its main business records.
Filing fees vary by state and partnership type, typically between $50 and a few hundred dollars. Online submissions clear in a few business days in most states; mailed paper filings can take weeks. Many states offer expedited processing for an added fee. Once approved, you’ll receive a stamped certificate or certificate of existence confirming legal recognition.2U.S. Small Business Administration. Register Your Business
Write a Partnership Agreement
No law requires the agreement to be in writing, and you don’t file it with the state. But every gap you leave gets filled by your state’s default rules. Those defaults typically split profits equally regardless of who put in what, give every partner equal management authority, and let any partner dissolve the business at will. If that isn’t what you actually agreed to, put it in writing.
At a minimum, the agreement should cover:
- Capital contributions: what each partner is putting in (cash, property, equipment, or expertise) and how those translate to ownership percentages.
- Profit and loss allocation. This doesn’t have to match ownership percentages; partners can agree to whatever arrangement makes business sense.
- Management authority: who can sign contracts, hire, open accounts, and bind the partnership. In a GP, every partner has this authority by default unless the agreement limits it.
- Partner compensation: salaries, guaranteed payments for services, or distributions only.
- Dispute resolution. A clause requiring mediation or arbitration before litigation can save significant legal fees.
- Withdrawal and buyout terms. Without a buyout provision, the partnership may have to dissolve entirely when one partner exits.
- Dissolution procedures: how the partnership winds down and the order in which creditors and partners get paid.
Partners also owe each other fiduciary duties of loyalty and care under most states’ versions of the Revised Uniform Partnership Act. These can’t be eliminated, but the agreement can define specific standards for measuring them, such as carving out permission for a partner to run a non-competing side business.
Get an EIN and Business Licenses
Every partnership needs a federal Employer Identification Number from the IRS. The EIN is the partnership’s tax ID, used to open bank accounts, file returns, and hire employees. Applying is free through the IRS online portal, which issues the number immediately.3Internal Revenue Service. Get an Employer Identification Number
Your city, county, or state will likely require industry-specific licenses on top of that. Restaurants need health permits. Contractors need trade licenses. Law firms, medical practices, and similar professional partnerships need occupational licenses for each partner. Each license carries its own application fees and renewal schedule, so build them into your startup budget.
Set Up Your Tax Obligations
A partnership doesn’t pay federal income tax itself. It files an information return, Form 1065, reporting total income, deductions, gains, and losses. It then issues each partner a Schedule K-1 showing that partner’s share of each item, which the partner reports on their personal return and pays tax on at individual rates.4Internal Revenue Service. Partnerships
Form 1065 is due the 15th day of the third month after the partnership’s tax year ends. For calendar-year partnerships that’s March 15. An automatic six-month extension is available with Form 7004, but it extends only the filing deadline, not the time partners have to pay tax on their share.5Internal Revenue Service. Publication 509 (2026), Tax Calendars
General partners owe self-employment tax (Social Security and Medicare) on their share of partnership income. Limited partners are generally exempt on their distributive share, except for guaranteed payments they receive for services actually rendered.6Internal Revenue Service. Self-Employment Tax and Partners Guaranteed payments (fixed amounts paid to a partner for services regardless of profit) are always subject to self-employment tax and are deductible to the partnership as a business expense.7Internal Revenue Service. Publication 541, Partnerships
Because nothing is withheld from partnership distributions, each partner makes quarterly estimated tax payments to the IRS using Form 1040-ES. Skipping these triggers interest penalties at filing time, which catches a lot of first-time partners off guard.8Internal Revenue Service. Businesses 1 – Estimated Tax FAQ
Keep the Partnership in Good Standing
LPs and LLPs typically must file annual or biennial reports with the state to keep their records current. These update partner names, addresses, and registered agent details. Fees range widely, from around $25 in some states to significantly more elsewhere. Miss the deadline and you’ll pay late fees; miss it long enough and the state can administratively dissolve the partnership, taking your legal status and any liability protection with it.
Insurance is the other piece. Given the personal exposure in a GP (and the limits of the LLP shield), general liability coverage, professional liability or errors-and-omissions coverage where relevant, and workers’ compensation once you have employees are practical necessities, not extras. Workers’ comp is required by law in nearly every state.
One boundary worth knowing: a March 2025 interim final rule exempted domestic reporting companies, including U.S.-formed partnerships, from the beneficial ownership information reporting requirement under the Corporate Transparency Act. Only foreign entities registered to do business in the U.S. currently have BOI filing obligations with FinCEN.9Federal Register. Beneficial Ownership Information Reporting Requirement Revision and Deadline Extension That could change if FinCEN issues a new rule, so it’s worth checking before you assume the exemption still applies.