California General Partnership Law

The California general partnership law specifies that the partnership is between two or more persons who will work together as co-owners of a business.3 min read

The California general partnership law specifies that the partnership is between two or more persons who will work together as co-owners of a business with the goal being to make a profit.

Overview of the California General Partnership Law

A partnership may be either limited or general. The partnership is a separate entity distinct from its partners.

Limited Liability Partnership

In California, a limited liability partnership (LLP) business structure is an option. It provides limited liability protection for all its partners. An LLP is limited to professionals such as architects, CPAs, and lawyers. Until January 1, 2019, engineers and land surveyors are also allowed to form an LLP.

General Partnerships

The "persons" in a general partnership may include individuals as well as other business entities. When a partnership is formed, most partners will create a formal partnership agreement that outlines each partner's rights and obligations. Creating and signing an agreement is not a requirement; a partnership can be established with just a handshake.

The laws relating to general partnerships in the state are outlined in the California Corporations Code, Title 2. Should a dispute arise as to the validity of the partnership, a partnership agreement is usually the determining factor used to establish its existence.

There is no limitation to the type of trade, profession, or occupation a general partnership may engage in. For information, see Corp. code 16101(1), (9). In the event that a general partnership is to engage in the banking business, the corporation would need to be organized for that structure. See Fin. Code 102.

All partners in a California general partnership are considered joint owners of the business. Each has an equal right in the company's management unless noted otherwise, and each shares in the business's profits and losses in relation to what they contributed financially to the business. All partners in a general partnership are bound by the acts of another partner regarding partnership business unless the partner does not have the authority to act on behalf of the business and the other party is aware of this fact.