1400 Gables Ct #103 Plano, TX 75075
5601 Bridge Street, #300, Ft. Worth, TX 76112

What About General Partnerships?

The general partnership is one of the oldest forms of doing business. In fact, many law firms formerly practiced in this form. It has the advantage of not requiring any state mandating filing to create the entity. All that is required is a general partnership agreement, which may be oral or written. Oral partnership agreements are strongly recommended against for the same reason that lawyers always recommend you “get it in writing”: (1) business participants’ memories fade, and they forget what the agreed to; (2) otherwise decent, honest people can become dishonorable under certain circumstances that didn’t exist at the time of the partnership’s creation; (3) it is difficult, though not impossible, to enforce an oral partnership agreement in court. Even if it can be enforced, the time, money and associated inconvenience can outweigh the benefits of the partnership.

General partnerships have the advantage of ease of formation, minimal expense, and flexibility as to terms and size. A major disadvantage, however, is that if any one partner is sued by an outside partner, all other partner’s assets are at risk of satisfying a judgment. This places a very high premium on forming such a partnerships only with individuals who you fully trust, and whose personal finances you have fully vetted. Even then, there is no predicting when a partner could find him or herself in financial difficulty or a suddenly risky situation, whether related to the business or not. Even if the vulnerability concerns the shared business of the partners, one must ask whether it is worth putting all of the partners’ individual assets at risk in the event of a judgment or other loss that cannot be protected by insurance. For a significant majority of business owners today, the answer is “No.”

Are there other forms of business that can combine the above described advantages of a general partnership with protecting against the downside risk to the owners’ assets? Check back next week for the answer.

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Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

Fort Worth Location (By Appointment Only)
5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297