Partnership
Formation

Types of Partnerships

General Partnership

Under the Oklahoma Revised Uniform Partnership Act (54 O.S. § 1-101 et seq.), a general partnership exists whenever two or more people go into business together—sometimes even without realizing it. In a general partnership:

• All partners share in management
• All partners have unlimited personal liability
• Each partner can bind the partnership to contracts
• Profits and losses are shared (equally, unless agreed otherwise)
• No state filing required (but registration recommended)

Limited Partnership (LP)

An LP has two classes of partners:

• General partners – Manage the business but have unlimited liability
• Limited partners – Invest capital but don't participate in management; liability limited to their investment

LPs require a filing with the Secretary of State and are often used for investment vehicles or family businesses where some members want passive involvement.

Limited Liability Partnership (LLP)

Similar to a general partnership, but partners are shielded from liability for the negligence or misconduct of other partners. Popular among professional service firms (accountants, architects). Oklahoma requires LLP registration.

Partnership Agreements

A written partnership agreement is essential—even among friends and family. Without one, Oklahoma's default rules apply, which may not match your intentions.

Key Agreement Provisions

• Capital contributions – Who contributed what, and what happens if more capital is needed
• Profit and loss sharing – How income is divided (not always equally)
• Management duties – Who handles what responsibilities
• Decision-making – What decisions require unanimous consent vs. majority vote
• Partner compensation – Salaries, draws, and expense reimbursement
• Adding new partners – Process and approval requirements
• Partner exit – Buyout provisions, valuation methods, payment terms
• Death or disability – What happens to a partner's interest
• Dispute resolution – Mediation, arbitration, or litigation
• Non-compete provisions – Restrictions on competing businesses

Partnership vs. LLC

Today, most businesses that would have been partnerships are formed as LLCs because:

• LLCs offer liability protection for all members
• LLCs maintain partnership tax treatment
• LLCs provide similar management flexibility

We often recommend multi-member LLCs over general partnerships unless there's a specific reason for the traditional partnership structure.

Protecting Your Partnership

• Document all major decisions in writing
• Keep separate partnership bank accounts
• Regular partner meetings with recorded minutes
• Clear expense reimbursement policies
• Annual review of the partnership agreement

Common Partnership Mistakes

Partnership disputes often stem from preventable errors:

• Operating on a handshake: Without a written agreement, Oklahoma default rules apply—and they may not match your intentions
• Unclear profit sharing: "We'll split it fairly" leads to arguments; specify exact percentages
• No exit strategy: Partners leave, die, or become disabled—plan for it now
• Choosing GP over LLC: General partnerships expose personal assets; LLCs offer similar flexibility with liability protection
• Ignoring buyout provisions: Without valuation methods and payment terms, partner exits become costly battles