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Limited Partnership FAQs

What is a limited partnership (LP)?

A limited partnership is similar to a general partnership, but offers limited liability protection to some partners. At least one partner must be a general partner with unlimited liability, and at least one partner must be a limited partner whose liability is typically limited to the amount of his or her investment.

Limited partners act as “silent partners” making a capital investment, much like passive shareholders in a publicly-traded corporation, but having no involvement in the management decisions of the business. To learn more about how LPs compare to other partnership types, view our Which Partnership Type is Right for Me article.

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When is the limited partnership business type most commonly used?

The limited partnership (LP) structure is especially appealing to types of businesses where a single, limited-term project is the focus, such as real estate or the film industry. LPs can also be used as a form of estate planning in that parents can retain control of their business while transferring interest to their children.

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How are limited partnerships taxed?

Limited partnerships (LPs) allow for pass-through taxation, as the LP's income is not taxed at the entity level, but a tax return for the partnership must be completed. Any income or loss of the LP as shown on this return is passed-through to the partners’ individual tax returns. The partners must then report the income or loss on their individual tax returns and pay any necessary tax.

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How many owners are required to form an LP?

An LP must have two or more owners. At least one must be a general partner who has unlimited, personal liability, and one must be a limited partner who has limited liability but is prohibited from participating in business management.

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Do I need an attorney to form a limited partnership?

No, an attorney is not a legal requirement to form an LP. You can prepare and file the incorporation documents yourself or through an online provider like BizFilings, but it’s good to understand the requirements of your intended state of incorporation. If you are unsure of which business type would be most beneficial to your business, consult an attorney or accountant.

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What should I name my LP?

Business owners often spend a lot of time deciding what to name a new company or venture. The name selected can say a lot about the company. Naming an LP is often different from naming a company that will seek to do business with other businesses or the general public, since many LPs are formed for limited term projects, estate planning and real estate. 

Legally, the name you select must not be "deceptively similar" to any existing company in your state of incorporation and must be "distinguishable on the record" of that state. All three of BizFilings LP incorporation service packages include a preliminary state name check in your state of incorporation. We also ask for two name choices on our incorporation order form. If your first name choice is not available, we will also check the availability of your second choice.

Some states only check proposed LP names against existing LPs, reserved and active, so you may wish to preform a trademark search to make sure the name you want to use is not already taken by another business type. Also, most states require that the name you select show your business is an LP, by including the words "Limited Partnership" or the abbreviation of "LP."

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Does my LP need a registered agent?

When you incorporate or register to transact business in another state (a process called foreign qualification), you must name a registered agent. The registered agent is responsible for receipt of important legal and tax documents on behalf of the business. The registered agent must have a physical address in the state of incorporation or qualification and be available during normal business hours.

BizFilings includes Registered Agent Service with its incorporation service packages. As your registered agent, BizFilings not only satisfies your state's legal requirement to have an individual or company receive important legal and tax documents on behalf of your company, but also provides a number of benefits at no additional charge to you, including our monthly Registered Agent Watch email, access to BizComply─our online compliance management tool, electronic Service of Process delivery, online access to your account and more.

Even if you are located in your state of incorporation, having BizFilings as your registered agent is tremendously beneficial if you:

  • Want to avoid the risk of non-compliance. Keeping your new business in compliance with state requirements is extremely important, but for small business owners, is often neglected. Many small business owners don’t have the time to keep on top of these state requirements. BizFilings acts as your compliance partner. With our Registered Agent Service and compliance tools, we help you avoid unnecessary state penalty fees and maintain your company's good standing in your state of incorporation and/or qualification.
  • Value privacy. When a company is served with a Service of Process (the document that initiates a lawsuit), it is often delivered by local law enforcement. Most business owners do not want police officers showing up in front of customers, employees or neighbors (in the case of a home-based business), to serve them notice that their company is being sued. With BizFilings as your as your registered agent service provider, we ensure you receive any Service of Process promptly and privately.
  • Have non-standard business hours. The registered agent for a business must be available during normal business hours to accept important documents as they are delivered. If you set your own hours, or you are often away from your office or home-office, having BizFilings as your registered agent ensures that you never miss these important communications. You receive them both discretely and when it’s convenient for you.
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What steps do I need to take to keep BizFilings as my registered agent?

With our limited partnership incorporation service packages, you not only receive our Registered Agent Service for 6 months free with your incorporation package order, but you also avoid interruption of this valuable service with our convenient auto-renewal program. For $167 per year, your Registered Agent Service will automatically be renewed to help ensure your company remains in good standing with the state. You can also choose one of our multi-year renewal options and save. At the time of renewal, you can choose to renew your Registered Agent Service at two years for $249 (save $129) or three years for $348 (save $219).

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How do I get started setting up an LP?

After you decide to form a limited partnership (LP), incorporation documents must be filed with the state and initial fees must be paid. After your incorporation documents are filed, it is recommended that you hold an organizational meeting of the partners where an operating/partnership agreement is adopted, partnership certificates are distributed and other preliminary matters are completed such as authorizing the opening of a bank account for the LP. BizFilings' Compliance Kit & Seal includes all the information and paperwork to make this process easier. Our Compliance Kit & Seal is included in our Standard and Complete Incorporation Service packages and can be added to our Basic Incorporation Service package.

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