How to Form a General Partnership in California

To form a general partnership in California, you and at least one other person simply have to start running a business together for profit. There is no state formation filing. The real work is everything that surrounds that moment: a written agreement between the partners, a fictitious business name filing if you’ll operate under anything other than the partners’ surnames, a federal EIN, local business licenses, and tax registrations. And before any of that, an honest conversation about the fact that every partner will be personally on the hook for the partnership’s debts.

The Partnership Exists the Moment You Start Operating

Under California Corporations Code Section 16202, a partnership exists the moment two or more people associate to carry on a business as co-owners for profit. This happens whether or not you intend to create one. If you and a friend start selling products together and splitting the revenue, you may already be partners in the eyes of the law.¹

Because there is no registration form to file with the Secretary of State, formation can happen through a handshake, a written contract, or conduct that shows two people co-owning a business. A few arrangements that look like partnerships are specifically excluded: co-owning property together, sharing gross returns from an asset, or receiving profit-based payments for rent, debt repayment, or independent contractor services.¹

Understand the Personal Liability Before You Go Further

The biggest downside of a general partnership is joint and several liability. Every partner is personally responsible for all debts and obligations of the partnership. If your partner signs a contract or causes harm while conducting partnership business, creditors can come after your personal assets to satisfy the debt, even if you had nothing to do with the decision. A creditor doesn’t have to chase each partner proportionally. They can pursue whichever partner has the deepest pockets for the full amount owed.

This exposure is the main reason many business owners choose an LLC or limited partnership instead. If you and your partners are comfortable with shared personal liability, a general partnership works. If not, this is the point to reconsider the structure before you move forward.

Write a Partnership Agreement

California does not require a written partnership agreement. Skipping one is a mistake that costs partners dearly when disagreements surface. Without a written agreement, every gap gets filled by the default rules in California’s Uniform Partnership Act of 1994, and those defaults often don’t match what the partners actually intended.²

Those defaults are worth knowing because they show what your agreement needs to override. Under Section 16401, each partner gets an equal share of profits and is charged with losses in proportion to their profit share. Every partner has equal management rights regardless of how much they invested. Ordinary business decisions are made by majority vote, but anything outside the ordinary course of business requires unanimous consent. Partners earn no salary or compensation for their work. And no new partner can join without every existing partner agreeing.³

If any of those defaults don’t fit your situation, the agreement needs to say so. The provisions that matter most:

Capital contributions. What each partner is putting in (cash, property, or services), and how additional contributions will be handled if the business needs more money later.
Profit and loss allocation. If you want splits that differ from equal shares, define the exact percentages or formula.
Management roles. Who handles day-to-day decisions, which decisions require a vote, and what voting threshold applies.
Partner compensation. If partners will draw salaries or guaranteed payments, specify amounts and conditions.
Dispute resolution. Require mediation or arbitration before anyone can file a lawsuit. Partnership litigation is expensive and public.
Withdrawal and buyout terms. How a departing partner’s interest gets valued and paid out, and the triggering events (death, long-term disability, retirement, loss of a professional license).

There are limits on what the agreement can change. California law prohibits eliminating the duty of loyalty between partners, unreasonably reducing the duty of care, or eliminating the obligation of good faith and fair dealing. You also cannot strip a partner’s right to access partnership books and records or override a court’s power to expel a partner.²

File a Fictitious Business Name Statement

If your partnership does business under any name other than the last names of every partner, you need to file a Fictitious Business Name (FBN) statement. You also need one if the name includes words like “Company,” “& Associates,” “Brothers,” or anything else suggesting there are additional owners beyond those named. Words that simply describe what the business does, like “Consulting” or “Plumbing,” don’t trigger the requirement on their own.⁴

The deadline is 40 days from when you start doing business under the fictitious name. You file with the county clerk in the county where your principal place of business is located. Filing fees vary by county but generally run between $10 and $40. Some counties accept online filings; others require an in-person visit or mail submission.⁵

After filing, publish the FBN statement in a newspaper of general circulation in the same county. Publication must happen within 45 days of the filing date and run once a week for four consecutive weeks. Then file an affidavit of publication with the county clerk within 45 days after the last publication date. Budget roughly $180 to $230 for the newspaper costs.⁶

An FBN statement expires five years from the filing date. If the only change at renewal is the refile itself and you refile within 40 days of expiration, you can skip the publication step the second time around.⁷

Consider a Statement of Partnership Authority

This step is optional, but it solves a real problem. Banks, landlords, and title companies often want proof that the partner they’re dealing with actually has authority to act on the partnership’s behalf. A Statement of Partnership Authority, filed with the California Secretary of State under Corporations Code Section 16303, provides that proof.⁸

The statement lists the partnership name, its principal office address, the names and mailing addresses of all partners, and which partners are authorized to act. It can also specify limitations on a particular partner’s authority. For real property transactions, recording a certified copy of the statement with the county recorder’s office makes the authority grant conclusive in favor of anyone who relies on it in good faith. If your partnership will buy, sell, or lease real estate, this filing is close to essential.⁸

Get a Federal EIN

Every general partnership needs an Employer Identification Number from the IRS. You’ll use it to file the partnership’s federal tax return, open a business bank account, and handle payroll if you hire employees. Applying online at irs.gov is free and gives you the number immediately. You can also apply by fax or mail using IRS Form SS-4, but those methods take longer.⁹

The application asks for the partnership’s legal name, trade name if different, mailing address, and the name and Social Security number of a responsible party. The IRS limits you to one EIN application per day, so don’t wait until the last minute if you have multiple entities to set up.⁹

Register for Taxes

A general partnership does not pay income tax itself. It files an informational return, and the income flows through to each partner’s personal return. That sounds simple, but the filing requirements stack up.

Federal

File IRS Form 1065 (U.S. Return of Partnership Income) each year, reporting the partnership’s total income, deductions, and each partner’s share. Each partner receives a Schedule K-1 showing their individual allocation, which they report on their personal Form 1040.¹⁰

Because general partners are not employees, the partnership does not withhold income or payroll taxes from their earnings. Each partner owes self-employment tax of 15.3% on their share of partnership income: 12.4% for Social Security (up to the annual wage base) and 2.9% for Medicare (no cap).¹¹

Partners must make quarterly estimated tax payments covering both income tax and self-employment tax. The due dates are April 15, June 15, September 15, and January 15 of the following year.¹²

California

California requires partnerships doing business in the state or earning California-source income to file a Partnership Return of Income (Form 565) with the Franchise Tax Board. The good news: general partnerships do not owe the $800 annual minimum franchise tax that limited partnerships and LLCs must pay. The partnership’s income passes through to each partner, who reports it on their California personal return.¹³

Get Local Licenses, Permits, and Insurance

Most California partnerships need at least a local business license or permit from the city or county where they operate. Requirements and fees vary widely by jurisdiction and industry. Check with both your city hall and county clerk’s office before you open for business. Operating without the right licenses can result in fines or a cease-and-desist order.

If the partnership hires any employees, California law requires workers’ compensation insurance. One employee triggers the requirement under Labor Code Section 3700.¹⁴

Depending on your industry, you may also need a seller’s permit from the California Department of Tax and Fee Administration (if you sell tangible goods), professional licenses from a state licensing board, or health and environmental permits. Operating without the proper permits risks more than fines: some contracts and legal claims can be voided if the business was not properly licensed at the time.

You Don’t Need to File With FinCEN

If you’ve heard about the Corporate Transparency Act’s requirement to report beneficial ownership information to FinCEN, set that concern aside. As of March 2025, FinCEN removed the beneficial ownership reporting requirement for all entities created in the United States, including partnerships. U.S. companies and their owners are fully exempt.¹⁵

1
California Legislative Information. California Corporations Code 16202
2
California Legislative Information. California Corporations Code 16103
3
Justia. California Corporations Code 16401-16406
4
California Legislative Information. California Business and Professions Code 17900
5
California Legislative Information. California Business and Professions Code 17910
6
California Legislative Information. California Business and Professions Code 17917
7
California Legislative Information. California Business and Professions Code 17920
8
Justia. California Corporations Code 16301-16310
9
Internal Revenue Service. Employer Identification Number
10
Internal Revenue Service. About Form 1065, U.S. Return of Partnership Income
11
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
12
Internal Revenue Service. Estimated Tax
13
Franchise Tax Board. Partnerships
14
California Department of Industrial Relations. DWC FAQs for Employers
15
FinCEN. FinCEN Removes Beneficial Ownership Reporting Requirements for U.S. Companies and U.S. Persons, Sets New Deadlines for Foreign Companies