General partnerships are the simplest way to legally establish a business partnership. If you're planning to start a business with others in Maryland, it's important to understand the steps involved in creating a general partnership. In this article, we'll cover the essentials you need to know to form a general partnership in Maryland.

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What is a General Partnership?

A general partnership is a business owned and operated by two or more individuals. Partnerships are popular among new businesses because they require fewer formalities and less paperwork than other business structures. General partnerships have several key features, including:

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- Each partner shares in the profits and losses of the business.

- The actions of one partner can legally bind the partnership and the other partners.

- Partnerships do not pay income tax at the entity level. Instead, each partner pays taxes on his or her share of partnership income.

Step-by-Step Guide to Forming a General Partnership in Maryland

1. Choose a business name: Choose a unique name for your partnership that is available and not in use by any other entity in Maryland. You can search for business names using the Maryland Department of Assessments and Taxation's business entity search tool. You may want to consider reserving your desired name for a period of 120 days during the formation process.

2. File a Maryland partnership registration with the Department of Assessments and Taxation: To register a partnership in Maryland, you will need to file Form 1, along with the applicable filing fee. The current filing fee for a Maryland partnership registration is $100. You can file online through the Department's SDAT Business Express platform, by mail, or in person.

3. Obtain necessary business licenses: Depending on the type of business you plan to operate, you may need federal, state, or local licenses or permits. You can check which permits and licenses are required from the Maryland Business License Information View Form (BLIM) application.

4. Prepare a partnership agreement: A partnership agreement is a legal document that outlines the business arrangements among the partners, including their roles, responsibilities, and how profits and losses will be divided amongst them. While not required by the state, having a partnership agreement can protect the partnership from future disputes and misunderstandings.

5. Apply for an Employer Identification Number (EIN): An EIN, also known as a Federal Tax ID Number, is a unique identifier assigned by the IRS to businesses. Unless your partnership will be operating as a single-member LLC taxed as a sole proprietorship, you will need an EIN for tax filing purposes. You can apply online or by mail.

6. Register for state taxes and obtain necessary permits: Depending on the type of business you plan to operate, you may need to register for state taxes such as sales tax, use tax, and withholding tax. You may also need to obtain specific permits, such as a liquor license, based on the nature of your business.

Conclusion

Creating a general partnership in Maryland is relatively straightforward. However, before starting a partnership, it's important to conduct thorough research to ensure your business operates successfully and within the purview of the law. It's recommended to consult with a lawyer or other experts to guide you through the process and provide legal and business advice. By taking the time to properly set up your partnership, you can avoid future legal and financial complications.

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