The entity of choice to achieve certain business objectives.
A limited partnership (LP) is much like a general partnership, but with a few significant differences.
Management of a limited partnership rests with the "general partner," who also bears unlimited liability for the company's debt and obligations. A limited partnership allows for any number of "limited partners," whose liability is limited to the total amount of their investment in the company.
Limited partners are sometimes referred to as "silent partners" - in other words, they can make investments in the company but have no voting power or control over its day-to-day operations. They can be a valuable source of capital in this business structure.
Limited partnership is the entity of choice for many law, accounting and finance firms. It's also a popular among businesses that focus on time-restricted projects, such as real estate and film production companies.
Advantages of a limited partnership include:
- Personal asset protection: The limited partnership structure offers liability protection up to the amount of the investment for the company's limited partners.
- Pass-through taxation. A limited partnership's income is not taxed at the business level; instead, business profit and loss are "passed through" to the partners for reporting on their personal tax returns.
- Full oversight: The general partner has complete management control of the limited partnership.
- Investment potential: Limited partnerships can generate capital investments by adding more limited partners.
It is important to note that certain issues must be addressed in the formation of an LP that can affect the limited liability provided by the LP, such as the role of the limited partners and the effect of the death, bankruptcy or insolvency of the GP or LP on the continued existence of the LP.
incorporate.com can help.
incorporate.com can help you register your limited partnership (LP) with the state. Simply describe your business objectives and provide some basic facts about your company and we'll complete your paperwork and return it to you once the formation has been approved.
Get more details about the limited partnership business structure in our Frequently Asked Questions section.
Call us at 855-236-4043 to get started.
Limited Partnership FAQs
- What is a Limited Partnership?
- What are the differences between a general partnership and a Limited Partnership?
- How are Limited Partnerships taxed?
- How many owners are required to form a Limited Partnership?
- Do I need an attorney to form a Limited Partnership?
- Is a Limited Partnership required to have a registered agent?
- After I form my Limited Partnership, how do I remain in compliance?
What is a Limited Partnership?
A Limited Partnership is a partnership consisting of a general partner, who manages the business and has unlimited personal liability for the debts and obligations of the Limited Partnership, and a limited partner, who has limited liability but cannot participate in management.Back to Top
What are the differences between a general partnership and a Limited Partnership?
A Limited Partnership offers protection from liability for the debts and obligations of the Limited Partnership to the limited partners. In a General Partnership, all of the partners are jointly and severally liable for the debts of the partnership.Back to Top
How are Limited Partnerships taxed?
The Limited Partnership is taxed as a partnership. Each partner reports his or her share of profit or loss on his or her individual tax return.Back to Top
How many owners are required to form a Limited Partnership?
At least one.Back to Top
Do I need an attorney to form a Limited Partnership?
No. You can prepare and file the necessary paperwork yourself, or you can use incorporate.com to help you form your Limited Partnership. If you are unsure whether forming a Limited Partnership will benefit your business, please call us at 800-818-6082. Our Business Specialists are happy to provide you with the information you need to decide whether to form a Limited Partnership.Back to Top
Is a Limited Partnership required to have a registered agent?
Yes. Limited Partnerships must designate someone to receive official state correspondence and legal notices, called service of process. Most states refer to this delegate as a "Registered Agent." Some states also use the terms "statutory agent" or "resident agent." Some states will not allow a business to serve as its own Registered Agent. Other states allow a company to designate an owner or director as its Registered Agent. However, that agent must:
- Remain available during normal business hours
- Maintain a physical address located in the state where the business is registered, and any states where the company is doing business
- List their name and address in public records
Because of these requirements, most businesses choose to name a third-party Registered Agent like incorporate.com.
Failure to respond to a legal notice can result in a default judgment against your company. This means that a court can order your business to pay significant penalties without hearing your side of the argument.Back to Top
After I form my Limited Partnership, how do I remain in compliance?
Most states require a Limited Partnership to pay an annual tax. The failure to pay that tax can result in the state terminating the Limited Partnership, exposing the limited partners to liability for the debts and obligations of the Limited Partnership. Additionally, there may be other compliance requirements, such as obtaining licenses with the city, county and or state.Back to Top