Legal Status

There are three forms of partnership recognized by Arizona law: general partnerships; limited partnerships; and limited liability partnerships. Absent the formal filing of papers to start a limited liability company or corporationbeforehand, whenever two or more people unite to run a business for profit they have formed a general partnership. There are no formal requirements to starting a general partnership but the partners should at a minimum enter into a partnership agreement that identifies each partner’s responsibilities and share in the partnership. Because there are limitations on partner liability, formal documents must be filed with the Arizona Secretary of State to create a limited partnership and limited liability partnership. Under Arizona law, partnerships are distinct legal entities that can own property and incur debt. To learn more about the different forms of partnership and required filing requirements, contact a business attorney.


The type of partnership entered into determines the partner’s level of involvement in managing the partnership. In a general partnership, all partners share to a certain extent responsibility for the day-to-day management and operations of the business. The extent each partner participates can be defined in a partnership agreement, which should be entered into by anyone entering a partnership. Without a partnership agreement spelling out each partner’s responsibilities, all partners have equal decision making authority. Limited partnerships differ in that limited partners generally provide investment but have limit or no say in the management of the business, which is handled by a general partner. For more information on partnership management, contact a business attorney.

Profit and Loss

In a general partnership, each partner gets a share of profits proportional to their investment in the partnership. Because there are no limitations on liability for members of a general partnership, each partner is jointly and severally liable for the debts of the partnership. Because the general partnership offers no protection to partners from business creditors and lawsuits against the company, each partner’s personal assets, including the savings account and possibly the house, are at risk. It is not advised to enter into a general partnership as YOU can be held 100% liable for the partnership’s debts.

In a limited partnership, general and limited partners share in the company’s earnings. General partners, however, are liable for the partnership’s debts. A limited partner’s liability is limited to the amount they have invested in the partnership. However, limited partners can open themselves up to liability for the partnership’s debts if they play a substantial role in the day-to-day operations of the partnership or otherwise holds him/herself out as a general partner.

In a limited liability partnership, the partners are not responsible for the obligations of the partnership. Rather, their liability is limited to their investment in the partnership. To learn more about protecting your personal assets, contact a business attorney.

Termination of the Partnership

Termination of a partnership is determined by the partnership agreement. If there is no partnership agreement or the agreement is silent on termination, the Revised Uniform Partnership Act adopted by the Arizona legislature governs termination. For more information on how to terminate your partnership agreement, contact a business attorney.

Partnership Agreement

Because partnerships can be formed with little to no formality, it is important to have a detailed partnership agreement. The partnership agreement is an internal document that should provide for distributions of profits and losses, the responsibilities of the partners for management of the business, what circumstances will trigger dissolution of the partnership, and how the partnership’s business will be wound down. If you are thinking about entering into a partnership, it is essential that you enter into a comprehensive partnership agreement rather than leaving the details to chance and Arizona law. To discuss your business goals with a business attorney, contact Blehm Law.