Serving business owners since 2007- 1. What is a limited partnership?
- 2. What is the difference between a general partnership and a limited partnership?
- 3. How is a limited partnership structured?
- 4. Is a written partnership agreement required?
- 5. What are some of the advantages of a limited partnership?
- 6. What are some of the disadvantages of a limited partnership?
- 7. Do I need an attorney to form a limited partnership?
- 8. What is a Limited Partnership Kit?
- 9. What is a Federal Tax Identification Number (EIN)?
- 10. How do I begin the process of forming my limited partnership?
1. What is a limited partnership?
A limited partnership is a partnership that is formed by two or more persons who choose to operate the business as a limited partnership instead of as a general partnership. A limited partnership is formed by filing required documents with the appropriate state.
2. What is the difference between a general partnership and a limited partnership?
In a general partnership, all partners can manage the business and all partners are personally liable for the debts and obligations of the partnership. On the other hand, limited partnerships have general partners who manage the business and passive partners, called limited partners, who are simply investors, having no control over the operation of the business. The general partners alone are personally liable for the limited partnership’s obligations. The limited partners have the same limited liability protection enjoyed by corporation shareholders and Limited Liability Company (LLC) members.
3. How is a limited partnership structured?
A limited partnership must have one or more general partners and one or more limited partners. The general partner(s) make decisions and run the business while the limited partners (“silent partners”) do not take part in its operation. General partners are solely liable for the obligations and liabilities incurred by the business, allowing the limited partners to invest in the business without such liability.
4. Is a written partnership agreement required?
No, the law does not require a partnership agreement but is very wise to have one spelling out the relationship of the partners, their management responsibilities, how profits and losses will be shared, and other things that may be important to the partners. Almost every state has laws governing partnerships and, without a written partnership agreement, the state’s partnership laws will govern the partnership, quite possibly in ways its partners will not like. It is therefore much better if the partners have outlined the rules they want to apply to their partnership.
5. What are some of the advantages of a limited partnership?
- Limited partners are not liable for the debts, obligations and liabilities of the partnership
- Protection of limited the partners’ personal assets is one of the major advantages of a limited partnership
- Raising additional capital is made easier due to the limited liability of limited partners
- There is less paperwork and limited partnerships are easier to manage than are corporations
- Limited partnerships are not themselves taxed so partners can enjoy pass through taxation as do other partnerships
- Losses can sometimes be used to shelter partners’ other income
6. What are some of the disadvantages of a limited partnership?
- Forming a limited partnership requires fining official documents with the appropriate state
- State filing fees must be paid
- Limited partnerships are not required to hold and document meetings as are corporations
- There must be one or more general partners who are personally liable for the debts, obligations and liabilities of the partnership
7. Do I need an attorney to form a limited partnership?
No. Formation of a limited partnership is primarily a clerical process and while it is relatively complex, anyone who understands and follows the required procedures can form one. We provide this formation service for substantially less than the amount charged by most attorneys. We can and do guarantee the accurate formation of a limited partnership but our service is not intended to serve as a substitute for professional advice. Since individual situations and state statutes vary, you may need to seek more detailed advice from your local professionals who are familiar with your specific requirements as well as those of the state in question. Since taxes are a prime consideration, it is important to consult with your accountant or tax advisor.
8. What is a Limited Partnership Kit?
A Limited Partnership Kit consists of many things that will help you comply with state rules and regulations regarding documentation and record keeping. A metal seal is used to make an official impression identifying the company on official documents.
9. What is a Federal Tax Identification Number (EIN)?
Limited partnerships must have a Federal Tax Identification Number, also known as an employer identification number (EIN), which is used to identify the business in any number of transactions. An EIN is obtained by submitting IRS Form SS-4 to the Internal Revenue Service. Your EIN will be needed to open a bank account. We can prepare this form for you and send it to you to sign (required) and mail to the Internal Revenue Service in the pre-addressed envelope we provide.
10. How do I begin the process of forming my limited partnership?
It couldn’t be easier. Start now by beginning to enter the information required to prepare and file the articles of organization in the state you select.
Don’t have all the information now? Afraid you won’t have time to finish?
Don’t worry. You can work on it now, save what you enter under your user name, and come back later to add or change information.
You are under no obligation – you don’t even have to use our service.
You don’t start the formation process unless and until you’re ready – only then do you pay.
