Limited Partnership (LP) Formation Service

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.

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.

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.

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.

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.

What should I name my LP?

Choose the name of your limited partnership carefully. It is very important that your name portray the image you want for your partnership. Legally, the name must not be "deceptively similar" to any existing company in your state and be "distinguishable on the record" of your state. Some states only check proposed LP names against existing LPs, reserved and active, so performing a trademark search to make sure the name you want to use is not already taken by another business type may make sense. 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."

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.