How are partnerships controlled and managed?

In a general partnership, each partner has the ability to take actions which can legally bind the partnership and, thus, the other partners themselves (even if those other partners have not been consulted or given their approval). In other words, each partner has full authority to exercise management and control of the partnership. When owners do not want to have control fully and equally shared like this, they can change the management structure through the terms of the partnership agreement. However, there are certain duties and obligations that cannot be changed. For example, in all partnerships, the individual partners are always entitled to all information about the business, such as financial information, details about transactions, etc. Similarly, because there is a fiduciary relationship between the partners, they always owe the other partners a duty of good faith, a duty of loyalty, and a duty of fairness in dealing with transactions relating to the partnership (in other words - you can’t screw over your partners).

As for the actual details about controlling and running a partnership, things can generally be as simple as you want them to be. While all partners in a general partnership (and all general partners in a limited partnership) have equal ability to conduct business, the major decisions are usually made by having the partners vote. While the votes may be based on the number of partners, most partnerships instead base them on partnership interests. Thus, if there are five partners, but one has a 60% interest in the partnership, he is essentially the controlling partner of the business. However, instead of this so-called “owner management,” the partners can adopt a structure more like a corporation, appointing a managing partner or a president, vice-president, etc.

Partnerships do not generally have to hold any form of regular meetings, like corporations. Thus, the partners can simply hold meetings when and if they feel there are important things to discuss or vote on. Similarly, unlike corporations, partnerships generally do not have to file any annual reports with the state, listing the details of the business. As a result, there are not really any business documents which a partnership should maintain aside from those which it decides are useful and necessary for running a business. However, while not necessary, partnerships should consider keeping a partner ledger.