At the Piatchek Law Firm, our attorneys assist clients with a variety of questions and concerns regarding limited partnership (LP) business formations. A limited partnership is a special type of partnership in which the limited partners share in the profits and losses of the business but do not participate in its management. While a general partnership usually works best with the involvement of only a few partners, a limited partnership can be useful for businesses looking to sell interests in the partnership without relinquishing too much control of the business’s operations to outside investors.
Forming a Limited Partnership
First, an individual must file a certificate of limited partnership with the state. A limited partnership requires at least one general partner, who is responsible for managing the business, and at least one limited partner, who is a passive investor who contributes funding but does not manage the business on a daily basis. Both the general partner and the limited partner in the limited partnership report their taxes individually. However, unlike the general partner’s income, the limited partner’s income is not considered earned income, so self-employment taxes usually do not apply.
Liability Protection as a Limited Partner
As long as the limited partner does not materially participate in the management of the business, they will have limited liability protection. This means that business creditors cannot sue the limited partner for more money than the limited partner has invested in the partnership. However, the general partner of the business does not have this protection. The general partner of a limited partnership business will be personally responsible for all business obligations.
How a Business Attorney Can Help
The Piatchek Law Firm’s knowledgable business attorneys are available to help you decide what type of business formation would best serve your interests. The laws concerning business formation are complex and vary from state to state. The expertise of an experienced attorney is invaluable to setting up your business correctly the first time around. For assistance creating and managing a limited partnership (LP), contact us today at 417-882-5858 to schedule a complimentary consultation.
