A general partnership is a type of legal structure where two or more individuals co-operate or form an association in order to establish a business, for the purpose of making a profit as a group. The incorporation process is also known as company formation. Profits are usually distributed equally between the partners, who are also equally personally liable for the entire company. However, the general partnership dissolves if one of the partners decides to withdraw from the shared business.

Even though general partnerships offer some tax exemptions, it should be pointed out that they have one major disadvantage in terms of personal liability. In a general partnership, the actions of one partner are automatically considered to be endorsed by the others, making each partner personally liable for the others’ actions. The liability of partners in a general partnership can be summed up as follows:

Each partner is responsible for his or her own actions.
Each partner is responsible for the actions of all other partners.
Each partner is responsible for the actions of the partnership’s employees.
Consequently, we would strongly recommend that you think twice and perform due diligence on your potential business partner(s). A good alternative to a general partnership may be a limited partnership or a limited liability partnership.

Owners of a general partnership
The owners of a general partnership are called 'the general partners', and they hold unlimited liability for the company. They are deemed to be partners after the agreement to incorporate a company has been finalised. Each partner has the power to conduct business on behalf of the company without permission or authorisation from the other general partners. General partners must always take tax planning into consideration, and it is highly advisable that they do not take any substantial risks on behalf of the company, since their personal assets would be put at risk.

Functions of a general partnership
General partnerships are formed for various reasons and they have certain legal implications, for example for company management procedures, profit-sharing, responsibility for partners’ debts, etc. Profits are always shared equally among all of the company’s partners, and they have absolute individual authority to manage and run the business. Moreover, all partners are considered to be liable if one or more of them have dealings with a third party, as any one partner can enter into and perform agreements on behalf of the partnership as a whole.