A General Partnership is a legal organization made up of two or more partners who are jointly and severally, and unlimitedly, liable for the partnership’s obligations. This model is regulated in Chapter II of the General Law of Commercial Companies (Mexico).

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In this post, we explain the characteristics of the General Partnership, along with legal aspects, advantages, and disadvantages.

General Partnership: Key Characteristics and Legal Essentials

General Partnership: Main Characteristics

Commercial entities in Mexico are distinguished by elements that determine their formation and responsibilities. Each has particular features that help determine which is most suitable based on the partners’ profile.

For a General Partnership, these are the main characteristics:

• It is based on mutual trust.

• Partners’ liability is joint and several and unlimited.

• It requires at least 2 persons, and contributions depend on the type of partner.

• The registered business name (firm name) includes the name of one or more partners.

Below we explain each characteristic in more detail:

Model Grounded in Mutual Trust

In a General Partnership, the relationship between partners is as important as the capital they contribute. It is characterized by mutual trust, involving not only investing money but also taking part in management and decision-making.

Partners’ Legal Liability

In a General Partnership, liability is unlimited and joint and several under Articles 25 and 26 of the General Law of Commercial Companies (Mexico).

In other words, partners assume a commitment beyond their capital contributions. This means that if the company cannot meet its financial obligations, they must respond with their own assets.

Likewise, it is a shared obligation that cannot be waived vis-à-vis third parties. Although a partner may be limited to a certain amount if the partners agree so in the partnership agreement.

Composition and Contributions

To form this type of entity, at least two persons are required. Contributions may be in money, assets, or services. This depends on the types of partners in the partnership and what is established in the partnership agreement.

Firm Name and Designation

Every company must have a registered business name, which must include at least one partner’s surname. Expressions such as “& Company” (or equivalent) are also used to indicate there are more members.

It is also a requirement to include the abbreviation that identifies the company type; in English we will refer to it simply as General Partnership.

Examples:

• “Sanchez & Company, General Partnership”

• “Lopez & Martinez, General Partnership”

If, for example, the partner with the surname “Lopez” withdraws from the company, the word “Successors” should be added to reflect the change. It would read:

“Lopez & Martinez, Successors, General Partnership”

However, companies may choose to change the firm name entirely instead of keeping it with the addition of “Successors.”

Legal Aspects and Operation of a General Partnership

Partnership Agreement and Amendments

The General Partnership in Mexico is governed by a partnership agreement. This document sets the rules for making changes and the partners’ limitations in their actions within and outside the company:

• Admission of new partners. As a rule, admitting a new partner requires unanimous approval, unless the agreement provides otherwise.

• Assignment of partnership rights. No partner may sell or transfer their interest to a third party without the others’ authorization. If approved, current members have a right of first refusal to keep that interest.

• Changes to the agreement. All votes are required to amend the partnership agreement. Except when the agreement allows decisions by majority, in which case the minority may withdraw.

• No competition. A partner may not engage in businesses of the same line or join companies that do so without the others’ authorization. If they do, they may be excluded, lose benefits, and even owe damages.

The partnership agreement is essential because it governs the company’s life and sets partners’ rights and obligations.

Variations Allowed by Law

The Mexican General Law of Commercial Companies allows the General Partnership to adapt to different organizational forms.

These variants are:

• Fixed capital. The traditional form, where capital is set in the agreement and any change requires partners’ consent.

• Variable capital. Partners may increase or reduce capital without amending the partnership agreement, pursuant to Articles 213 and 215. It is more flexible for new contributions or capital withdrawals.

In this case, what changes is how capital is managed.

General Partnership in Mexico: Advantages and Disadvantages

If you are considering starting a business in Mexico, a General Partnership can be a good alternative. Beyond the aspects mentioned, keep the following in mind:

Advantages

Among the advantages of a General Partnership are:

• Simplified formation. Creating a General Partnership in Mexico requires fewer formalities than other company types.

• Internal control. All members actively collaborate in management and major decisions.

• Trust among partners. As it is based on personal relationships, it fosters greater commitment and seriousness.

• Flexibility in agreements. Profit distribution and roles can be negotiated.

• Legal recognition. Although simple, it has legal backing, which builds confidence with third parties.

Disadvantages

Some disadvantages of the General Partnership are:

• Exposure of personal assets. If the company cannot pay its debts, partners must use personal assets to cover them.

• Complex entry or exit. Being admitted or withdrawing as a partner requires general authorization, which can create friction.

• Dependence on current partners. Economic growth often depends on members’ contributions, limiting expansion capacity.

Therefore, it may be wise to evaluate other options, for example, a Limited Liability Company or a Partnership Limited by Shares. It all depends on your business needs.

How to Form a General Partnership in Mexico: Quick Guide

If you want to form a General Partnership in Mexico, there are certain legal aspects you must comply with.

The basic steps are:

1. Draft the partnership agreement and define the registered business name.

2. Formalize before a notary and register the company with the Public Registry of Commerce.

3. Register the company with the Mexican Tax Administration Service to obtain the Federal Taxpayer Registry (RFC) and define the applicable tax regime.

These are the basic formal steps that ensure the company’s legal and tax validity in Mexico.

General Partnership vs. Limited Liability Company

A General Partnership can be an attractive option for freelancers and professionals who want to set up their own practice. Even so, here is a comparison with a Limited Liability Company to give you a sense of the differences:

Conclusion

The General Partnership has several significant advantages. It is a suitable option if you have reliable partners, want a structure that is simple to form, and gives you direct control over management.

However, committing your personal assets if results are not as expected is a major risk to consider. Other models may be more beneficial for you, depending on your projects.

In any case, if you want to plan for your business, check out our post with some examples of General Partnerships.

Meanwhile, DolarApp can be an alternative if you have international clients. With our app, it’s very easy to make transactions in digital dollars (USDc) and digital euros (EURc)—including transfers and currency conversions at a fair exchange rate.

Frequently Asked Questions

How many partners are required for a General Partnership?

The law requires a minimum of two partners and does not set a maximum. While very flexible, it is a structure based on trust and direct participation. So make sure you partner with people who are up to the task.

Do partners have to answer with their personal assets?

Yes. Liability is unlimited and joint and several as provided by law. Thus, if the company faces financial difficulties, creditors may pursue the partners, who must respond.

What happens if a partner whose surname appears in the firm name withdraws?

Article 29 of the General Law of Commercial Companies (Mexico) states that if a partner leaves, the company may keep the same collective firm name. However, to reflect this change, the word “Successors” must be added.

Sources:

Articles 25 and 26 of the General Law of Commercial Companies

Articles 213 and 215 of the General Law of Commercial Companies

Public Registry of Commerce