How To Set Up A General Partnership
A general partnership exists in law once the partnership agreement has been concluded and the company has been entered into the commercial register. Individuals can come together to form a general partnership, with no minimum capital contribution, instead of each setting up a sole proprietorship. The key points are summarised below.
Suitability
The general partnership is particularly suited to multiple founders who establish a small business together, enabling them to operate together without contributing the capital needed for a limited liability company (LLC) or public limited company (PLC). Once a business is up and running successfully, it is often converted into or used to found a LLC or public limited company PLC.
Liability
With a GP, the partners are personally liable with their own assets for business risks, as it is not a legal entity.
Conversion
A general partnership can be converted at any time into a LLC or PLC by transferring assets or making a contribution in kind.
Commercial register
It is mandatory to enter a GP in the commercial register, regardless of its annual turnover.
Advantages
A GP can be founded easily by multiple people with no minimum capital contribution; thanks to the low set-up costs, it is suitable for the initial stage working together.
Additional advantages:
- Easy organisation and low outlay
- Any company name can be chosen, to be followed by the letters “GP”
Disadvantages
The partners in the GP are liable with their personal and business assets.
Additional disadvantages:
- Mutual dependency on the part of the partners
- Unlimited joint and several liability
- Less flexibility among the partners (e.g. non-compete clause)
