How to Form a Partnership in California: Structure, Filing, and EIN

To form a partnership in California, pick one of three structures (general partnership, limited partnership, or limited liability partnership), put a written agreement in place, file the required formation paperwork with the Secretary of State for an LP or LLP, get a federal EIN, and plan for the annual tax and reporting obligations that follow. A general partnership can exist without any state filing; LPs and LLPs each require a $70 filing fee.¹ The sequence below walks through the whole process.

Step 1: Choose the Partnership Structure

California recognizes three. Which one you pick decides whether you file anything with the state and how much personal risk each partner carries.

General Partnership

A general partnership forms automatically when two or more people go into business together for profit. No state filing is required.² The cost of that simplicity is liability: every partner is jointly and severally liable for all partnership debts, and creditors can reach any partner’s personal assets.³

Limited Partnership

An LP has at least one general partner who runs the business and one or more limited partners who contribute capital but stay out of management. The general partner carries unlimited personal liability. Limited partners risk only what they invested, provided they don’t start actively managing.⁴ An LP must file a Certificate of Limited Partnership before it legally exists.

Limited Liability Partnership

California restricts LLPs to lawyers, accountants, and architects.⁵ Partners are generally not liable for partnership obligations or for the acts of other partners just because of partnership status.³ Each partner still answers for their own wrongful conduct. An LLP must register with the Secretary of State and must have the required insurance or security in place before it can operate (see Step 5).

Step 2: Draft a Partnership Agreement

California does not require a general partnership to have a written agreement, but operating without one lets state default rules decide your deal. Those defaults assume equal profit sharing, equal management authority, and majority-vote decisions no matter who contributed what. A written agreement overrides the defaults.

At minimum, the agreement should state each partner’s initial contribution (cash, property, or services) and how those contributions are valued, the formula for splitting profits and losses, who handles daily operations, which decisions need unanimous versus majority approval, and whether any partner can bind the partnership to contracts above a set dollar amount on their own.

The provisions that matter most are the ones nobody wants to negotiate: what happens when a partner withdraws, is removed, dies, or becomes disabled. For each scenario, set a method for valuing the departing partner’s interest (a revenue-based formula, a third-party appraisal, or a fixed price) and define the payout terms. Without these, one partner’s exit can freeze the business or force an unwanted dissolution.

Many agreements also require mediation before litigation and send unresolved disputes to binding arbitration. Arbitration moves faster, stays private, and lets the parties choose someone with industry knowledge.

Step 3: Pick a Name and a Registered Agent

The partnership’s name must be distinguishable from entities already on file with the Secretary of State. Search the state’s business name database through BizFile Online before committing. An LP’s name must include “Limited Partnership” or “LP,” and an LLP’s name must include “Limited Liability Partnership” or “LLP.”

LPs and LLPs also need a registered agent authorized to receive legal documents. The agent must have a physical California street address (not a P.O. box) and be available during business hours. A partner can serve, or you can hire a commercial agent service for an annual fee.

Step 4: File With the Secretary of State

A general partnership can file a Statement of Partnership Authority (Form GP-1), but filing is optional.² For an LP or LLP, filing is how the entity comes into existence.

Limited partnership: file a Certificate of Limited Partnership (Form LP-1). Filing fee: $70.¹
Limited liability partnership: file an Application to Register a Limited Liability Partnership (Form LLP-1). Filing fee: $70.¹

Both forms require the partnership’s name, street address, the registered agent’s name and address, and information about the general partners. LLP and GP filings can be submitted electronically through BizFile Online.⁶ LP filings can be submitted by mail or in person at the Sacramento or Los Angeles offices. Once approved, file-stamped copies serve as official proof of formation.

Step 5: If You’re Forming an LLP, Line Up the Required Security

An LLP must have insurance, a cash escrow, or equivalent security in place for claims arising from its professional services before it can operate. This is a formation requirement, not something to postpone.⁷

For law and accounting firms, the baseline is $1,000,000 in aggregate coverage for firms with five or fewer licensed professionals, with an additional $100,000 for each additional licensee. The cap is $5,000,000 for accounting firms and $7,500,000 for law firms. The requirement can be met with liability insurance, cash held in trust or bank escrow, U.S. Treasury obligations, bank letters of credit, surety bonds, or a combination. A firm with a net worth of at least $10,000,000 can self-insure.⁷

Step 6: File a Fictitious Business Name If Needed

If the partnership operates under a name that doesn’t include the surnames of all partners, California requires a fictitious business name (FBN) statement, sometimes called a DBA, filed with the county clerk in the county where the business has its principal office. You have 40 days from the start of business to file.⁸

Within 30 days of filing, publish the statement in a newspaper of general circulation in that county, once a week for four consecutive weeks. Within 30 days after the last publication, file an affidavit of publication with the county clerk to close out the process.⁸ Filing and publication fees vary by county, so check with the clerk’s office before budgeting.

Step 7: Get an EIN and Open a Business Bank Account

Every partnership needs a federal Employer Identification Number from the IRS to file its tax return and to hire employees.⁹ Applying is free and takes a few minutes on the IRS website.¹⁰ You’ll need it to open a bank account, so do it early.

Open a dedicated business bank account in the partnership’s name and run all income and expenses through it. Commingling personal and business funds is one of the fastest ways to undermine the liability protections an LP or LLP structure is supposed to provide.

Check whether your business needs any local, state, or industry-specific licenses or permits. California’s free CalGold database generates a customized list of permit requirements based on business type and location.

Ongoing Obligations After Formation

Formation is a one-time event. Keeping the partnership in good standing is not.

Annual $800 Franchise Tax (LPs and LLPs)

Every LP and LLP owes the Franchise Tax Board $800 per year, due whether or not the partnership earned income, and payable every year until the entity is formally canceled with the Secretary of State.⁵ General partnerships do not owe this tax.¹¹ A narrow exception exists for LLPs that did no business in California and had a tax year of 15 days or fewer, but it applies to almost no one in practice.

Statement of Information (LPs and LLPs)

LPs and LLPs must file a periodic Statement of Information with the Secretary of State. The state assigns a six-month filing window based on the formation or registration month.¹² If a partner, address, or registered agent changes between filings, update it promptly. Missing the window can lead to penalties or suspension of the entity.

Federal Partnership Return

A partnership does not pay federal income tax itself. It files an informational return on Form 1065 reporting its income, deductions, and credits, and issues a Schedule K-1 to each partner showing their share.¹³ Each partner reports the K-1 figures on their individual return.

Form 1065 is due by the 15th day of the third month after the partnership’s tax year ends. For calendar-year partnerships, that’s March 15.¹⁴ Late-filing penalties are assessed per partner per month.

Partners also owe self-employment tax. General partners pay it on their full distributive share plus any guaranteed payments. Limited partners generally owe it only on guaranteed payments for services they personally performed.¹⁵ It sits on top of regular income tax and catches many first-time partners off guard.

Keep clean internal records as you go: notes of major partner decisions, copies of filed documents, the partnership agreement and amendments, financial statements, and tax returns. Records showing the partnership functions as a separate entity from its partners are among the strongest defenses in any later liability dispute.

1
California Secretary of State. Business Entities Fee Schedule
2
California Secretary of State. Starting a Business – Entity Types
3
California Legislative Information. California Code CORP 16306 – Partner Liability
4
California Legislative Information. California Code CORP 15904.04 – Limited Partnership Liability
5
Franchise Tax Board. Limited Liability Partnership
6
California Secretary of State. Online Business Services
7
California Legislative Information. California Code CORP 16956 – LLP Security Requirements
8
CalOSBA. Set Up Your Business in California
9
Internal Revenue Service. Get an Employer Identification Number
10
Internal Revenue Service. Employer Identification Number
11
Franchise Tax Board. Partnerships
12
California Secretary of State. Statements of Information Filing Tips
13
Internal Revenue Service. About Form 1065, U.S. Return of Partnership Income
14
Internal Revenue Service. Starting or Ending a Business
15
Internal Revenue Service. Instructions for Schedule SE (Form 1040)