Form a General Partnership in Michigan

Forming a Michigan general partnership is a fast and easy way to get your business started. You’ll want to confirm that the general partnership business model fits your needs before forming a partnership in Michigan. In a Michigan general partnership, business partners share equally in the company’s profits and losses.

Step 1: Determine if you should start a general partnership

Whether a general partnership is right for you often depends upon your appetite for personal liability, your budget for business compliance, or both. We’ve put together some pros and cons of forming a partnership in Michigan. While this can’t directly answer the question of what business structure is right for you and your partner, looking at the pros and cons may help you make an informed decision for your business.

Pros

A general partnership can be a great business entity option for many Michigan entrepreneurs because:

• It’s easy and cost-effective to form
• It requires little maintenance
• Compliance is relatively inexpensive
• The distribution of losses and profits is typically straightforward
• General partnerships enjoy pass-through taxation 

A short-term business venture is a great candidate for a general partnership structure. However, if your goal is to sell or pass your partnership interest down to your kids, this business model may not be for you. You may need a more durable or transferrable business entity structure. 

Michigan general partnerships are typically designed to dissolve when one partner leaves the business or passes away. It can be difficult and expensive to create a general partnership that’s easily transferrable, and other business entities may be more suitable to meet those goals.

Cons

Some potential drawbacks of running a general partnership include: 

• Lack of personal asset protection, unlike an LLC or corporation
• Partners can be held jointly and severally liable for the partnership’s liabilities
• Potentially stricter rules for transferring business ownership to a new partner
• Lack of options for raising capital compared to corporations and other types of business entities

If you’re still undecided, a trusted business adviser can give you additional insight on whether forming a partnership in Michigan is right for your business goals. 

Step 2: Choose a business name

As we mentioned, Michigan general partnerships don’t need to register with the Secretary of State like limited liability companies (LLCs) or corporations. However, you may need to reserve or register your business’s “trade name” or “doing business as” (DBA) name. A DBA name is any name for your partnership other than the partners’ first names, last names, or a combination thereof. If you decide you want to use a different name for your business, make sure to check out the Michigan Secretary of State’s business naming rules.

Step 3: File a DBA Name (if needed)

A partnership that wants to use a DBA will take two key steps to do so. First, you need to run a search on the Michigan Secretary of State’s business database to make sure you’ll be the only general partnership using that name. Once you’ve confirmed that your business’s name is unique, you can file a request for a DBA name with the county clerk where you do business. Our fast, easy Michigan DBA Service can help you get a DBA in place for your Michigan general partnership as quickly as possible.

Step 4: Draft and sign Partnership Agreement

In Michigan, crafting your Partnership Agreement is an essential part of starting your business. A Michigan general partnership agreement governs how your business operates. The types of rules your Michigan general partnership agreement might cover include:

• Admission of new partners
• Dissolution of the partnership
• Resolution of conflicts
• Rights of individual partners

In the absence of a Partnership Agreement, your business has to rely on the Michigan Uniform Partnership Act for guidance on how to operate. However, the Michigan partnership laws are a one-size-fits-all solution that may not suit your company well. A Partnership Agreement, on the other hand, can be tailored specifically to the needs of your enterprise. 

Step 5: Obtain licenses, permits, clearances

You might have to obtain certain licenses and permits before you can get your general partnership running. We can help compile a Business License Report with the help of our partners at Avalara. This report quickly identifies your licensing and permitting needs at the local, state, and federal levels of government. With this in hand, you’ll have a hassle-free way to quickly apply for and get the licenses and permits you need.

Step 6: Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is like a social security number for your business. This is something your company obtains from the Internal Revenue Service (IRS). An EIN is essential so your partnership can properly pay its federal taxes. We can help get that task off your plate with our Employer ID Number Service. 

Step 7: Get Michigan state tax identification numbers

You may also need to register for a state tax ID. You can register for your Michigan state tax ID number with the Michigan Treasury Online. Even if you don’t sell goods or services or even have any employees, your Michigan general partnership may still need a state tax ID. Raise any questions about your partnership’s potential state tax liability with your accountant or other tax professional.

Forming a Business Partnership in Michigan: Next Steps

After you’ve formed your business, received permits and licenses, and set up your tax ID numbers, setting up a business bank account is your next logical step. You may also want to look into different types of business insurance, as well as potential office space to separate your home and workspaces. You will also want to keep up with your taxes.

How We Can Help

A Michigan general partnership is easy to start, inexpensive to maintain, and can be a great choice for many business owners to get going fast. But the small steps of legal compliance along the way may trip you up. Don’t worry, we won’t let you sweat the small stuff. Our renowned suite of business development and maintenance services can help you with development and compliance throughout the entire life cycle of your business.

And if you ultimately decide that you want to form some other type of business entity, we can help with our Michigan LLC and Michigan Corporate Formation Services. We take care of the paperwork so you can get down to business faster.