General partnerships are the simplest business structure in Texas. Two people start a business together without forming an LLC or corporation, and under Texas law they already have a partnership — whether they know it or not, whether they intended it or not, and whether anything is in writing or not.

That simplicity is both the appeal and the danger. No filing fee, no state registration, no paperwork threshold to clear. But also no liability shield, no automatic buy-sell provisions, no clear exit mechanism, and no default answer to the questions that eventually arise in every business relationship: who decides, who gets paid, and what happens when one partner wants out or cannot perform.

This post explains how Texas general partnerships form and operate under the Texas Business Organizations Code, what the default rules are when the partners have no written agreement, what a well-drafted partnership agreement should contain, and why the legal exposure of operating as a general partner in Texas is more significant than most business owners realize when they start.

How a Texas General Partnership Forms

Under § 152.051 of the Texas Business Organizations Code, a general partnership is created when two or more persons associate to carry on a business for profit as co-owners. That definition contains no requirement of a written agreement, no filing with the Texas Secretary of State, no minimum capital contribution, and no specific intent to form a partnership. The law infers the partnership from the conduct of the parties.

The practical consequence is that Texas general partnerships form constantly and accidentally. Two contractors who split jobs and share equipment. Two friends who open a booth at a farmers market and split the proceeds. Two professionals who refer work to each other and share office costs. In each case, depending on the specific facts, Texas law may well treat the arrangement as a general partnership — with all of the legal consequences that follow.

The Three Elements of Partnership Formation

Texas courts apply a three-part test to determine whether a general partnership exists:

• Two or more persons — the partners can be individuals, corporations, LLCs, or other legal entities
• Carrying on a business — a single transaction may be enough; the business does not need to be continuous or ongoing
• As co-owners for profit — the parties must share profits and losses, not just share revenue or work together on a project

The third element — co-ownership for profit — is the most frequently litigated. Sharing revenue is not the same as being a co-owner. A contractor who is paid a percentage of project revenue is not automatically a partner. But a person who shares in the profits of the ongoing enterprise — who receives a cut of what the business earns, not merely compensation for specific services — is much more likely to be treated as a partner under Texas law.

Section 152.052 of the Texas Business Organizations Code lists specific factors courts use to determine whether a partnership exists, including: whether the parties received a share of the business's profits; whether they had a right to participate in management; whether they contributed money, property, or services to the business; and whether they had joint or common ownership of property used in the business. No single factor is conclusive, and courts look at the totality of the arrangement.

The Assumed Name Certificate

Although no filing is required to create a Texas general partnership, partnerships that conduct business under a name other than the partners' full legal names must file an Assumed Name Certificate (commonly called a "DBA" or "doing business as" filing) with the county clerk in each county where the partnership does business, under § 71.051 of the Texas Business and Commerce Code. Failure to file does not invalidate the partnership, but it can create complications when opening bank accounts, entering contracts, and enforcing claims in court.

The Default Rules: What Happens Without a Written Agreement

When Texas general partners have no written partnership agreement — or when their agreement is silent on a particular issue — the Texas Revised Partnership Act (Chapter 152 of the Texas Business Organizations Code) supplies default rules that govern the partnership's operation. Understanding these defaults is essential, because they apply automatically and may produce outcomes the partners never contemplated.

Equal Sharing of Profits and Losses

Under § 152.203, each partner shares equally in the partnership's profits and losses — regardless of how much capital each partner contributed. A partner who invested $200,000 and a partner who invested $5,000 share profits and losses equally under the default rule. This surprises many partners who assumed their economic stake would be proportionate to their capital contribution. A written agreement specifying the profit and loss allocation is essential any time the partners' contributions or expected returns are not equal.

Equal Right to Manage

Under § 152.201, each partner has an equal right to participate in the management and conduct of the partnership's business. Ordinary business matters are decided by majority vote; matters outside the ordinary course of business — including amendments to the partnership agreement — require unanimous consent. This means a two-partner business can be deadlocked on any ordinary decision if the partners disagree, with no default tiebreaker.

The implications of this default rule become acute when the partnership has an even number of partners with equal votes and a disagreement on a significant business decision. Without a written agreement that designates a managing partner or establishes a tiebreaker mechanism, the deadlock may be unresolvable outside of litigation.

No Compensation for Partnership Services

Under § 152.203(c), a partner is not entitled to compensation for services performed for the partnership — except for reasonable compensation during the winding up of the partnership's business. Partners receive their share of profits, not a salary. A partner who is doing the bulk of the operational work and expects to be paid a market-rate salary for that work will be disappointed by the default rule. Written agreements routinely provide for management fees, guaranteed payments, or salary arrangements that modify this default.

Unanimous Consent for New Partners

Under § 152.201(c), admitting a new partner requires the unanimous consent of all existing partners. This protects each partner's right to choose their co-owners — but it also means that a partner who wants to bring in additional capital by admitting a new partner cannot do so without every existing partner's agreement.

Partnership Books and Records

Under § 152.212, every partner has the right to inspect and copy the partnership's books and records at any reasonable time, for any purpose reasonably related to the partner's interest in the partnership. This right cannot be restricted by the partnership agreement below a baseline of reasonable access. Partners who are denied access to the partnership's financial records have a statutory right to compel access — and the denial itself is evidence of the kind of conduct that can support a breach of fiduciary duty claim.

Partnership at Will and Dissolution

Without a written agreement specifying the partnership's duration or the events that trigger dissolution, a Texas general partnership is a "partnership at will" — any partner can dissolve it at any time by expressing their intent to withdraw. When a partner withdraws from an at-will partnership, the partnership is dissolved unless the remaining partners agree to continue the business.

This default creates significant instability for business operations. A disgruntled partner who withdraws triggers dissolution of the entire enterprise. A written agreement that specifies the partnership's duration, the grounds for dissolution, and the rights of remaining partners to buy out a withdrawing partner's interest is one of the most important protections a partnership can have.

Personal Liability: The Defining Risk of the General Partnership

The single most important legal characteristic of the Texas general partnership — and the most significant reason most business owners should think carefully before operating as one — is unlimited personal liability.

Under § 152.304 of the Texas Business Organizations Code, each partner in a Texas general partnership is jointly and severally liable for all debts and obligations of the partnership. "Jointly and severally" means that a creditor of the partnership can pursue any individual partner for the full amount of the partnership's debt — not just that partner's proportionate share. A partnership with three equal partners has a $300,000 judgment entered against it; the creditor can collect the full $300,000 from any one partner, leaving that partner to seek contribution from the other two.

This liability is not limited to obligations the individual partner personally incurred or approved. A partner is liable for contracts signed by any other partner acting within the scope of the partnership's business, for torts committed by any other partner in the ordinary course of the partnership's business, and for any other obligations the partnership incurs through its authorized activities.

Partner as Agent of the Partnership

Under § 152.301, each partner is an agent of the partnership for the purpose of carrying on its business. Any act of a partner — including signing contracts, making purchases, incurring debt — binds the partnership if it is apparently carrying on the partnership's ordinary business, even if the other partners did not authorize the specific act and even if the act was contrary to an agreement between the partners. A creditor who deals with one partner in good faith, without knowledge of any restriction on that partner's authority, can hold the entire partnership — and every partner personally — liable.

The implications are significant for multi-partner businesses. One partner's reckless commitment — a poorly negotiated vendor contract, an unauthorized equipment lease, an agreement entered without consulting the other partners — can create personal liability for every partner in the firm. This is the reality that drives most sophisticated business owners toward the LLC or corporation structure, which provides a liability shield the general partnership form does not.

Liability for Partnership Torts

Under § 152.303, the partnership is liable for the loss or injury caused to a person as a result of a wrongful act or omission of a partner acting in the ordinary course of the partnership's business. And because each partner is personally liable for partnership obligations, every partner faces personal exposure for torts committed by any other partner in the course of the business — regardless of whether the innocent partner had any knowledge of or involvement in the wrongful conduct.

Fiduciary Duties Between Texas General Partners

Every partner in a Texas general partnership is a fiduciary to every other partner. Under § 152.204 of the Texas Business Organizations Code, general partners owe each other — and the partnership — duties of loyalty, care, and good faith and fair dealing. These are not contractual obligations that can be easily waived; they are status-based duties imposed by law as a consequence of the fiduciary relationship that the partnership creates.

The Duty of Loyalty

The duty of loyalty requires each partner to act in the partnership's interest — not their own personal interest, and not the interest of any entity they separately control. Specific obligations include:

• Accounting to the partnership for any benefit derived from the conduct of partnership business or from use of partnership property, including the appropriation of a partnership opportunity
• Refraining from dealing with the partnership in any manner that is adverse to the partnership's interests
• Refraining from competing with the partnership in the conduct of its business

Partners who divert business opportunities from the partnership to personally controlled entities, who use the partnership's resources for personal benefit, or who operate competing businesses without disclosure are in breach of the duty of loyalty — and are liable for all profits earned from those activities, regardless of whether the partnership suffered a corresponding loss.

The Duty of Care

The duty of care requires each partner to act in good faith and in a manner the partner reasonably believes to be in the best interest of the partnership, with the care of a person in a like position who acts in good faith. Partners who make reckless management decisions, fail to exercise ordinary business judgment, or neglect their management responsibilities breach the duty of care and are liable for resulting harm to the partnership.

Good Faith and Fair Dealing

The obligation of good faith and fair dealing requires each partner to exercise their authority and discretion in a manner that is honest, transparent, and consistent with the other partners' reasonable expectations. A partner who exercises discretionary authority — over timing of distributions, over compensation arrangements, over major business decisions — in a manner designed to benefit themselves at the other partners' expense is acting in bad faith even if each individual decision is technically authorized.

These fiduciary duties are directly relevant to the disputes that actually arise in Texas general partnerships. When one partner begins managing the business in ways that benefit themselves at the other partners' expense — taking excessive draws, diverting clients, competing through separately owned entities, excluding the other partners from information — the fiduciary duty framework provides both the legal theory and the measure of damages.

What a Texas Partnership Agreement Should Address

A written partnership agreement is not required to form a Texas general partnership, but it is indispensable for operating one with any confidence that disputes can be resolved and the partners' intentions will be respected. The default rules under the Texas Business Organizations Code are a last resort — they fill gaps when the partners have said nothing, and they rarely reflect what the partners actually intended.

A well-drafted Texas general partnership agreement should address the following:

Capital Contributions and Ownership Percentages

The agreement should specify how much each partner contributes initially, whether additional contributions will be required, and what ownership percentage each partner holds. If ownership is not proportionate to capital contribution — because one partner is contributing expertise, relationships, or ongoing services rather than cash — that arrangement must be explicitly documented to avoid disputes about what each partner is entitled to.

Profit and Loss Allocation

The default equal-sharing rule under § 152.203 will apply unless the agreement specifies a different allocation. If the partners intend to share profits and losses in proportion to their ownership percentages, to their capital contributions, or according to any other formula, the agreement must say so. It should also address how distributions are made — the timing, the amounts, and who has authority to declare a distribution.

Management Authority

The agreement should designate who manages the partnership's day-to-day operations, what decisions require partner vote versus what decisions can be made unilaterally by a managing partner, and what vote threshold applies to significant decisions. In a two-partner business, this section should specifically address deadlock — what happens when the partners disagree — and should provide a mechanism for resolving deadlocks that does not default to dissolution.

Partner Compensation

If any partner is to receive a salary, management fee, or other compensation for services provided to the partnership, the agreement must specify it. The default rule provides no compensation for partner services beyond the profit share. A managing partner who expects to receive market-rate compensation for running the business needs that expectation documented in the agreement.

Admission of New Partners

The agreement should specify the process for admitting new partners, whether by unanimous consent or some other threshold. If the partners anticipate bringing in additional capital through new partners, or if the business is expected to grow, the admission provisions need to be thoughtfully drafted to allow the necessary flexibility while protecting existing partners' ownership percentages and governance rights.

Transfer Restrictions

A partner's interest in a Texas general partnership is personal property that can be transferred — but transfer of a partnership interest does not automatically make the transferee a partner with management rights. The agreement should specify whether partners are permitted to transfer their interests, to whom, on what conditions, and what rights the remaining partners have to purchase a transferring partner's interest before it can be sold to an outsider. Without transfer restrictions, one partner can effectively sell their interest in the business to a stranger, leaving the other partners with an unwanted co-owner.

Withdrawal, Retirement, and Expulsion

What happens when a partner wants to leave? The agreement should specify whether a withdrawing partner is entitled to the fair market value of their interest, when and how that value is determined, and the payment terms. It should also address what happens when a partner dies, becomes incapacitated, or files for personal bankruptcy — events that can trigger dissolution under the default rules but that a well-drafted agreement can handle without disrupting the business.

Expulsion of a partner — removing an underperforming or disruptive partner against their will — is not available under the default rules without dissolution. If the partners want the ability to expel a partner for cause, that authority must be explicitly created in the agreement, with clear procedures and standards.

Dissolution and Winding Up

The agreement should specify what events trigger dissolution, what vote is required, who is responsible for winding up the partnership's affairs, and how the partnership's assets are distributed on dissolution. The default winding-up rules under Chapter 11 of the Texas Business Organizations Code apply if the agreement is silent — but those defaults may not reflect the partners' intentions, particularly with respect to how assets are valued and distributed among partners with different ownership percentages and capital account balances.

Dispute Resolution

The agreement should specify how disputes between partners are resolved. Options range from internal escalation procedures to mediation to arbitration to litigation in a specified venue. Many Texas partnership agreements include a mandatory mediation provision before any partner can initiate litigation — which can reduce both cost and relationship damage in disputes that might otherwise be resolvable without court involvement.

Registered Limited Liability Partnerships: The Liability Shield Option

Texas offers a variation on the general partnership form that provides personal liability protection: the registered limited liability partnership (LLP). Under § 152.801 of the Texas Business Organizations Code, a general partnership can register as an LLP by filing a registration statement with the Texas Secretary of State. Once registered, partners are not personally liable for the debts and obligations of the partnership arising from errors, omissions, negligence, incompetence, or malfeasance of other partners or employees acting in the course of the partnership's business.

The LLP registration does not eliminate all personal liability — partners remain personally liable for their own wrongful acts and for obligations they personally guarantee. But it eliminates the most dangerous aspect of general partnership liability: the risk that one partner's negligence or misconduct creates unlimited personal exposure for every other partner.

LLP registration is particularly common among professional firms — law firms, accounting firms, medical practices — where the risk of professional malpractice liability makes the unlimited personal liability of a pure general partnership unacceptable. The registration fee in Texas is modest, the annual renewal requirement is straightforward, and the liability protection is meaningful.

For most new Texas businesses with multiple owners, however, the LLC or corporation structure provides more comprehensive protection and greater operational flexibility than the LLP. The LLP is most valuable for existing general partnerships that want to add a liability shield without changing their fundamental structure and operations.

When General Partnerships Become the Starting Point for Disputes

The disputes that Hopkins Centrich handles most frequently in the general partnership context are not formation disputes — they are the disputes that arise when a partnership that formed without a written agreement, or with an inadequate one, reaches a point of conflict between the partners.

The most common scenarios:

One Partner Takes Control

In a two-partner business where the partners have no written agreement, one partner frequently gravitates toward operational control over time. They manage the accounts, control the bank accounts, sign the contracts, and make the day-to-day decisions. The other partner becomes increasingly peripheral. When a dispute arises, the controlling partner claims a larger share of the profits, a management fee that was never documented, or ownership of assets that belong to the partnership. The other partner has a valid claim for breach of fiduciary duty and an accounting — but the absence of a written agreement makes both the liability theory and the damages calculation significantly more difficult to establish.

Partners Disagree on Direction

The equal management right under § 152.201 means that two-partner businesses are structurally vulnerable to deadlock. When partners disagree on a significant decision — whether to take on a major new client, whether to borrow to expand, whether to bring in a new partner — and neither can compel the other, the business can become paralyzed. Without a dispute resolution mechanism in a written agreement, the options are limited: negotiate a buyout, dissolve the partnership, or litigate.

A Partner Competes or Diverts Business

Partners who begin directing business to separately owned entities, who solicit partnership clients for a competing venture, or who use partnership resources for personal projects are in breach of the duty of loyalty. These cases require prompt action to stop the ongoing harm and to establish the scope of damages — which requires access to both the partnership's financial records and the records of the competing enterprise. Hopkins Centrich handles these cases regularly and understands both the litigation strategy and the forensic accounting work required to quantify the harm.

A Partner Wants Out

Withdrawal from an at-will Texas general partnership triggers dissolution unless the remaining partners agree to continue. This creates leverage for both sides: the withdrawing partner has the power to force dissolution; the remaining partners have the power to continue the business and buy out the withdrawing partner — but only if an agreement specifies those rights. Without a written buy-sell provision, valuing the withdrawing partner's interest and agreeing on payment terms becomes a litigation risk.

Practical Guidance for Texas Partners

If you are forming a Texas general partnership, or if you are already operating as one, the following practical points apply:

• Get a written agreement before the business generates significant value. The longer partners operate without a written agreement, the harder it is to reconstruct what they intended, and the more the default rules — which may not reflect anyone's intentions — will govern any dispute.
• Address liability from the start. If the business carries any meaningful risk of contract or tort liability, consider whether a Texas LLC or corporation would provide better protection than a general partnership. The formation cost is low and the liability protection is substantial.
• Do not assume the default rules work in your favor. Equal profit sharing, equal management rights, no partner compensation, and at-will dissolution are defaults that frequently surprise partners who assumed their arrangement was different. Review the default rules against your actual arrangement and document the differences in writing.
• Treat the fiduciary duties seriously. Partners who use their position to benefit themselves at the other partners' expense — through self-dealing, opportunity diversion, or competition — face real legal consequences under Texas law. The duty of loyalty is not a formality.
• Consult counsel before a dispute becomes litigation. The cost of a well-drafted partnership agreement is a fraction of the cost of resolving a partnership dispute in court. The cost of legal advice at the early stages of a partnership problem — before positions harden and assets are moved — is substantially less than the cost of addressing it after the fact.

Hopkins Centrich and Texas Partnership Disputes

Hopkins Centrich PLLC is AV Preeminent® rated by Martindale-Hubbell in both 2025 and 2026 — the highest peer-reviewed legal rating in the industry. Our attorneys have handled Texas general partnership disputes — including breach of fiduciary duty claims, accounting actions, dissolution proceedings, and contested partner buyouts — for a combined 40+ years. We understand both the transactional side of how partnerships should be structured and the litigation side of what happens when they are not.

We represent both partners who have been harmed by a co-partner's misconduct and partners who are defending against claims arising from a business relationship that broke down. In either role, we bring the same preparation, the same understanding of Texas partnership law, and the same commitment to telling our clients the truth about their situation and their options.

When Texas partnership disputes require litigation, we are ready. Our $32 million verdict in Montgomery County — among the top 20 Texas business verdicts of 2021 — reflects the results we achieve for clients who have been harmed by the misconduct of those they trusted to act as co-owners and fiduciaries.

If you have a Texas general partnership question — whether you are forming a new partnership and want to do it correctly, or you are in an existing partnership that has developed problems — call Hopkins Centrich. We will give you an honest assessment of where you stand and what your options are.