What is a "general partnership"?
A partnership is very similar to a sole proprietorship, but just add more people. In other words, there's no distinct, separate, separately recognized legal entity. What a partnership is is anytime more than one person gets together and they're doing some sort of thing, whether its a business or its fixing up a car together or whatever, they are in a general partnership. A general partnership, both of the partners or any partner, if its more than two, can bind the company with a contract. For instance, if I were general partners with my best friend in an endeavor to start a new business, if my best friend went out and signed a multi-million dollar contract for telephone service, I as the other general partner and my entire partnership would be bound by that. And also, if for some reason our partnership was sued, both individuals are sued together, and if one person, lets say myself, I didn't have any money and couldn't satisfy a judgement, the entire judgement would have to be satisfied by the other partners. So what that means is all partners have unlimited liability for debts and credits, creditors of the company, and additionally, all of the partners are responsible for the income, so when income comes in, its split among the partners equally according to their proportion. Now, with the general partnership you can get a little bit more creative and help to make it a little bit more legally efficient and that is by signing a partnership agreement, something that typically a lawyer would do or you'd go to a lawyer and have them draw up, as to what everyones rights and responsibilities were in a partnership.
