Form a General Partnership in Tennessee

A simple yet effective way to start a new business is a Tennessee general partnership. Any type of business that has two or more owners can be a general partnership. Besides a sole-proprietorship, a general partnership is the easiest form of business structure for a new company.

The partners will share in both the profits of the business and also the debts or liabilities. We will show you what it takes to create a general partnership in Tennessee, along with reasons to use this form of business and reasons not to.

Step 1: Determine if you should start a general partnership

The pros and cons of using a general partnership for your new business are pretty straightforward. You need to review each category to see if this form of business structure is the best choice for your plans.

Pros

Here are the positives about forming a partnership:

• Easy to set up
• A lot less paperwork and time for maintaining the business
• Profits are easily shared
• Pass-through taxation at the individual level and tax rates

If you plan on having a small company with just a few owners, a Tennessee general partnership is a good way to start.

Cons

There are some negative aspects to using a general partnership for your new business. After reviewing the cons, you may decide to go a different route with a different business structure.

• You may have to share your partner’s legal and financial issues
• Selling or transferring a partnership interest can be difficult
• Sometimes partners have conflicts about the future of the company
• It can be harder to raise capital for investments in your business

If you are unsure if a general partnership is right for your business plans, there’s always the option to review the issues with professional tax and business advisors.

Step 2: Choose a business name

Depending upon the type of business you have, the name you use could be very important for marketing purposes. But you may want it to be simple, such as the individual partners’ names. Whatever name you choose, a Tennessee general partnership doesn’t need to file a fictitious name with the state.

Step 3: File a DBA Name (if needed)

A DBA in Tennessee is called an “assumed name.” Assumed name petitions are filed on the Tennessee Secretary of State’s website. You would go through this process if you want to market your company under a different name than its official name. Also, general partnerships are required to file their assumed name with the County Clerk in the county where their business is located.

Step 4: Draft and sign Partnership Agreement

Partnership Agreements are a good way to establish some important rules and procedures that you and your partners have agreed upon. Tennessee doesn’t require you to have an agreement, but you can avoid potential conflict in the future by writing up a Tennessee General Partnership Agreement. There are no set rules as to what should be written up. Whatever you and your partners decide is important can be put in the agreement. Here are some ideas:

• When can new partners be added and under what terms
• Under what circumstances should the company dissolve
• A mechanism to resolve conflicts
• Individual partner rights

A Partnership Agreement is a great way to ensure all of the partners are on the same page regarding the most important parts of the business.

Step 5: Obtain licenses, permits, clearances

Licenses, permits, and clearances are required for almost every Tennessee business. This is one of the most important research topics you need to perform. If you miss a license or permit, then your business can be shut down. That’s why we work with Avalara which provides a Business License Report so you won’t miss any federal, state, or local licensing and permitting needs necessary to run your company.

Step 6: Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is an identification number for your business, similar to an individual receiving a social security number. The IRS issues your company’s EIN. You can file taxes, open up a company checking account, and obtain business loans with an EIN. We offer an Employer ID Number Service so that you can quickly request and receive your EIN.

Step 7: Get Tennessee state tax identification numbers

You don’t need a separate Tennessee state tax ID to file your taxes. However, if your company is a retail business, you’ll have to register to pay sales and use tax.

Forming a Business Partnership in Tennessee: Next Steps

The previous steps explain how to form a general partnership in Tennessee. After completing the steps for forming a partnership in Tennessee, you might want to talk to an insurance professional to discuss what business insurances you need to purchase. Also, contact a tax and accounting professional with any detailed questions regarding using a general partnership to structure your company.

How We Can Help

A Tennessee general partnership is a simple business structure that’s easy to set up. But you and our partners don’t have to be alone in the process. We can help you every step of the way with our business development and maintenance services, including our Worry-Free Compliance Service. With our help, you’ll be able to spend more time focusing on your business.

If a partnership isn’t right for your plans, we can help with our Tennessee LLC and Tennessee Corporation Formation Services. We also have services to assist you in filing your corporate charter if you choose to incorporate, and your Operating Agreement if you choose to form an LLC.

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.