By Jake Lawson, LLC Formation Strategist
Look, I’m going to cut straight to the chase here. After guiding over 1,200 entrepreneurs through business formation decisions, I’ve seen this scenario play out too many times: folks think a general partnership in Vermont sounds simple and cheap, only to realize they’ve painted themselves into a corner.
Here’s the reality check you need: forming a general partnership in Vermont requires almost identical paperwork to creating an LLC, but strips away all the legal protections that make business ownership smart instead of scary.
Let me walk you through everything you need to know about Vermont general partnerships—and more importantly, why you should probably choose a different path.
The Vermont Business Structure Landscape
When you’re ready to make your business official in the Green Mountain State, you’ve got several structural options. Your choice isn’t just about paperwork—it determines three critical factors:
- Tax obligations (how much Uncle Sam gets and when)
- Personal liability exposure (whether creditors can chase your personal assets)
- Administrative burden (how much red tape you’ll wrestle with annually)
After diving deep into Vermont’s Secretary of State requirements and studying Title 11, Chapter 22 of Vermont’s Annotated Statutes, here’s what I’ve learned: the state makes partnership formation surprisingly bureaucratic for something that offers zero asset protection.
Sole Proprietorship: The True “Simple” Option
Flying solo? A sole proprietorship is genuinely the path of least resistance. You keep all profits, shoulder all responsibilities, and pay taxes on business income through your personal return.
The catch? Zero separation between you and your business means creditors can come after everything you own.
General Partnership: Simple in Name Only
Got a business partner? The conventional wisdom says general partnerships are the “easy” multi-owner option.
Here’s where that wisdom falls apart in Vermont: you still have to file formal paperwork with the state. Plus, you get all the personal liability headaches of a sole proprietorship, multiplied by however many partners you have.
How Vermont General Partnerships Actually Work
A general partnership creates a formal business relationship where two or more people agree to share assets, profits, debts, and—this is crucial—unlimited personal liability.
Vermont’s Uniform Partnership Act governs these arrangements, and here’s something most guides won’t tell you: the state requires an “Assumed Business Name Registration” for ALL partnerships, even if you’re operating under your full legal names.
The Specialized Partnership Alternatives
Vermont also recognizes:
- Limited Partnerships (LPs)
- Limited Liability Partnerships (LLPs)
- Limited Liability Limited Partnerships (LLLPs)
These structures serve specific purposes—think law firms or investment vehicles—but they’re not what most entrepreneurs need for standard business ventures.
Disclaimer: I’m sharing formation insights, not legal advice. Your specific situation may require professional consultation.
The Vermont Partnership Formation Process
Step 1: The Planning Phase
Before any paperwork, nail down these fundamentals:
Partner Selection: Choose wisely. Adding or removing partners later requires unanimous consent from existing partners—I’ve seen partnerships implode over this.
Ownership Structure: Determine each partner’s:
- Capital contribution (money/assets invested)
- Profit distribution percentage
- Operational responsibilities
Business Fundamentals:
- Revenue model (how you’ll actually make money)
- Industry classification (check NAICS codes)
- Primary business address
- Marketing strategy basics
Step 2: Draft Your Partnership Agreement
Vermont doesn’t legally require a partnership agreement, but try opening a business bank account without one. Good luck.
Your agreement should address:
- Ownership percentages and voting rights
- Decision-making processes
- Dispute resolution mechanisms
- Partner exit procedures
- Death/disability contingencies
I’ve created partnership agreements for hundreds of businesses. The ones that skip this step almost always regret it later.
Step 3: File the Required Vermont Paperwork
Here’s where Vermont gets unnecessarily complicated. Unlike most states, you MUST file an “Assumed Business Name Registration” with the Secretary of State, regardless of whether you’re using a DBA.
Filing Details:
- Platform: Vermont’s Online Services Filing System
- Cost: $70
- Processing: Typically 3-5 business days
Even if your partnership is simply “Johnson & Smith General Partnership,” you still need this registration. It’s bureaucracy for bureaucracy’s sake.
Step 4: Obtain Your Federal EIN
Every partnership needs an Employer Identification Number for tax purposes. You’ll file Form 1065 annually, even though the partnership itself doesn’t pay federal taxes.
Key Point: Don’t let the “Employer” part confuse you. You need an EIN whether you have employees or not—it’s basically your business’s Social Security number.
Step 5: License and Permit Research
Vermont skips the general state business license requirement, but industry-specific and local permits still apply. Research requirements through:
- Vermont’s Office of Professional Regulation
- Your local city/town offices
- Industry-specific regulatory bodies
Step 6: Banking and Ongoing Compliance
Business Banking Requirements:
- Signed partnership agreement
- EIN confirmation letter
- Approved assumed name registration
- Photo ID for all partners
Record-Keeping: While Vermont doesn’t mandate specific partnership records, maintain:
- Tax returns (3+ years)
- Partnership agreements
- Financial statements
- Meeting minutes and major decisions
The Tax Reality Check
Partnerships enjoy “pass-through” taxation—profits and losses flow directly to partners’ personal tax returns. No double taxation like corporations face.
The Annual Tax Dance:
- Partnership files informational Form 1065
- Each partner receives a K-1 showing their profit/loss share
- Partners report their portions on personal returns
- Partners pay taxes at individual rates
Sounds reasonable, right? Here’s the problem: you get identical tax treatment with a multi-member LLC, but with actual legal protection.
Why I Almost Never Recommend General Partnerships
The Fatal Flaw: Unlimited Personal Liability
Every partner is personally liable for ALL partnership debts and legal judgments. Your business partner makes a costly mistake? Creditors can pursue your house, car, savings—everything.
I’ve watched partnerships destroy personal finances because one partner’s poor decision became everyone’s problem.
The Professional Credibility Gap
Try explaining to a bank that you’re a “general partnership.” Watch the confusion. Many institutions barely understand this structure, creating unnecessary friction for banking, insurance, and vendor relationships.
The Vermont Paperwork Paradox
Here’s the kicker: Vermont’s partnership requirements are nearly identical to LLC formation, but without any of the benefits. You’re doing similar work for inferior protection.
The Smarter Alternative: Multi-Member LLCs
What You Get:
- Identical pass-through taxation
- Personal asset protection
- Enhanced business credibility
- Clearer regulatory framework
- Easier banking and financing
Vermont LLC Requirements:
- Articles of Organization filing
- $155 state filing fee
- Registered agent appointment
- Annual report compliance
Yes, it costs slightly more upfront. The protection is worth every penny.
Formation Service Recommendations
If you’re going the LLC route (which you should), I’ve tested the major formation services extensively:
Northwest Registered Agent: My top pick. Transparent pricing, excellent registered agent service, no hidden upsells. Current promotion brings LLC formation down to $39 plus state fees.
LegalZoom: More expensive at $149 plus fees, but solid service if you prefer brand recognition.
I’ve worked with both companies and can vouch for their reliability—just avoid the add-on trap.
Real-World Partnership Example
Let me illustrate with a scenario I see frequently:
Sarah and Mike want to start a consulting firm. They choose a general partnership to “keep things simple.”
What Actually Happens:
- File assumed name registration ($70)
- Obtain EIN (free but time-consuming)
- Draft partnership agreement (essential for banking)
- Research local permits
- Set up business banking (complicated by partnership structure)
Six months later: A client sues over alleged contract breach. Even though Mike handled that project, Sarah’s personal assets are at risk.
The LLC Alternative: Same formation steps, similar costs, but Sarah’s house isn’t on the line for Mike’s mistakes.
Vermont Partnership FAQs
Q: Do all Vermont partnerships need state registration? A: Yes. The assumed name registration is mandatory, regardless of your actual business name.
Q: Can one partner sign contracts for the partnership? A: Depends on your partnership agreement and Vermont law. This ambiguity is another reason partnerships create headaches.
Q: What’s the difference between general and managing partners? A: General partners have ownership stakes. A managing partner handles day-to-day operations. Unlike LLCs, these roles aren’t standardized.
Q: How do partnerships handle taxes? A: The business files Form 1065 but pays no taxes. Partners report their shares on personal returns and pay individual rates.
My Bottom Line Recommendation
After 15+ years in business formation, I can count on one hand the situations where a general partnership made sense. For 99% of multi-owner businesses, a multi-member LLC provides identical tax benefits with crucial legal protections.
The math is simple:
- Partnership: ~$70 filing fee, unlimited liability
- LLC: ~$225 total cost, personal asset protection
That extra $155 is the best insurance policy you’ll ever buy.
Ready to Form Your Vermont Business?
Skip the partnership headache. Start your Vermont LLC the right way:
Option 1: DIY through Vermont’s Secretary of State (if you enjoy paperwork)
Option 2: Use Northwest Registered Agent for professional formation at $39 plus state fees
Option 3: Get comprehensive support through LegalZoom for $149 plus state fees
Don’t gamble with your personal assets. Choose protection over false simplicity.
Have questions about Vermont business formation? I’ve helped over 1,000 entrepreneurs navigate these decisions. The right structure sets you up for success—the wrong one can destroy everything you’ve built.
About Jake Lawson: LLC Formation Strategist with 15+ years helping entrepreneurs choose smart business structures. MBA Finance (UT Austin), Certified Tax Consultant. No affiliations, no upsells—just honest advice based on real-world experience.