Selecting a Limited Partnership (LP) for a new business venture requires and analysis of the pros and cons of the entity relative to your specific circumstance and needs, therefore, we have assembled a brief Q&A regarding the essentials related to the choice of a Limited Partnership.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?
- Is a Limited Partnership required to have a registered agent?
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.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.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.How many owners are required to form a Limited Partnership?
At least one.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.