DETAILED LIMITED PARTNERSHIP INFORMATION
Set forth below is detailed information regarding the Limited Partnership formation process. Topics include choice of entity (whether to form a corporation, LLC or limited partnership), the State in which to form your limited partnership, selecting a registered agent, limited partnership business names, limited partnership company kits, Limited Partnership Agreements, Employer Identification Numbers (EIN), principal place of business for your Limited Partnership, General Partners, etc.
Selecting a Form of Entity for your New Company: Corporation, LLC (Limited Liability Company) or Limited Partnership (LP)
No single factor is determinative in choosing whether to start your new business by incorporating a corporation, an LLC or a limited partnership. If properly organized and maintained, all three types of business entities establish separate legal entities that can provide their owners with protection against personal liability for the debts and obligations of the new business. If properly formed and maintained, a corporation is taxed as a separate entity unless the corporation and its shareholders or stockholders elect Subchapter S Status for the new corporation. In general, LLCs and limited partnerships provide their owners with pass-through taxation treatment, and there is little, if any, taxation at the entity level.
A corporation is organized by filing Articles of Incorporation (or a Certificate of Incorporation) with the Secretary of State's office, adopting Bylaws, appointing directors and officers, and issuing stock to the Company's shareholders (or stockholders). The members of the Board of Directors of a corporation govern the Company's overall business affairs, but elect officers to manage the day-to-day business of the Company. An LLC is formed by filings Articles of Organization (or a Certificate of Formation) with the Secretary of State's office, adopting an LLC Operating Agreement (or LLC Agreement), appointing a manager (or managers) and issuing membership units to the Company's members. The manager(s) of an LLC govern the Company's overall business affairs and can either manage the day-to-day business of the Company, or appoint officers to manage the day-to-day business of the Company. A limited partnership is organized by filing a Certificate of Limited Partnership with the Secretary of State's office, entering into a Limited Partnership Agreement and issuing partnership units to its partners. Every limited partnership must have at least one general partner who manages the day-to-day business of the limited partnership. The other partners in a limited partnership are referred to as limited partners.
Selecting a State in which to Form your Limited Partnership (LP): California, Delaware, Florida, Nevada, New York or Texas
The first step in forming every Limited Partnership is to file a Certificate of Limited Partnership with the Secretary of State's office in the State in which the organizers would like the new limited partnership to be formed. Determining which State in which to file often is governed by where the business is located, a desire to take advantage of lower (or no) taxes on income in certain States and a desire to establish the business under the laws of pro-business States. For example, the State of Delaware generally is considered to be a very pro-business state; whereas, the State of Nevada does not impose income taxes on business income.
Selecting a Registered Agent for your Limited Partnership (LP)
Every limited partnership must appoint a registered agent in its Certificate of Limited Partnership. The registered agent is the person upon whom any lawsuit or other legal proceeding against the limited partnership can properly be served, and to whom information from the Secretary of State's office and the taxing authorities will be sent. The registered agent must have an address in the State in which the limited partnership is being formed. The name and address of the registered agent will be public knowledge and easily retrievable by anyone through the Secretary of State's office. Although one of the organizer's of a new business may serve as its registered agent, many business owners elect to have an unrelated company act as the Company's registered agent in order to avoid unnecessary disclosure of their names and addresses. A and A Companies serves as registered agent for service of process for its clients in California, Delaware, Florida, Nevada, New York and Texas.
Selecting a Business Name for your Limited Partnership (LP)
The business name that you select for your limited partnership cannot already be in use or be reserved by someone else, and it cannot be deceptively similar to another name in use or reserved for use. Business name availability is determined by the Secretary of State's office of the State in which you are forming your limited partnership. The best way to ensure that your new business will have the name you want is to provide A and A Companies with a list of 3 names, in order of preference, and request that A and A Companies check for business name availability before submitting the Certificate of Limited Partnership. If you do not do this, and the name you have selected is not available, your Certificate of Limited Partnership could be rejected by the Secretary of State's office and the formation of your new business delayed several weeks.
Every limited partnership must include as part of its name, "LP", "L.P." or "Limited Partnership."
Ordering a Company Kit for your Limited Partnership (LP)
All Limited Partnerships should maintain books and records that contain, among other things, minutes of meetings and a log indicating ownership in the Company. Most companies maintain these and other records in a Minute Book. In addition, many limited partnerships issue certificates to evidence ownership in the Companies (Limited Partnership Unit Certificates).
A and A Companies can provide you with a Company Kit that comes complete with a leather-bound, gold embossed Minute Book and official Limited Partnership Unit Certificates.
Preparing Limited Partnership Agreement for your Limited Partnership
In order to complete the formation of a new limited partnership the partners must adopt a Limited Partnership Agreement. The Limited Partnership Agreement governs the business affairs of the limited partnership and the relationship among the various partners, and sets forth the tax treatment for the limited partnership and its partners. A typical Limited Partnership Agreement addresses such matters as becoming a partner in the limited partnership, voting rights of partners, contributions to capital, management, duties of the General Partner, allocation of income and loss, distributions to partners, restrictions on the transfer of limited partnership interests, indemnification of a Company's General Partner and certain other agents, termination of the limited partnership, and other general company matters.
A and A Companies prepares Limited Partnership Agreements for its customers. These Limited Partnership Agreements are tailored to the specific limited partnership based on information that you supply to us in your Limited Partnership Application.
Preparing IRS Form SS-4 Employer Identification Number (EIN) for your Limited Partnership (LP)
Every limited partnership that employs persons and pays wages must have its own Employer Identification Number (or Tax Identification Number). This number is analogous to an individual's social security number. This requirement exists even if you are the only employee of your new business.
A and A Companies prepares IRS Form SS-4 Employer Identification Number (EIN) applications for its customers. This Form is tailored to the specific limited partnership based on information that you supply to us in your Limited Partnership Application. It can take several weeks to receive an Employer Identification Number back from the Internal Revenue Service, but at A and A Companies we can tell you how to obtain that number immediately after your new limited partnership has been formed.
Principal Place of Business for Limited Partnerships
Every limited partnership must have a principal place of business. The address for this principal place of business must be a physical location (not a post office box). A Company's principal place of business can be a home address. A Company's principal place of business need not be located in the State in which it is organized. However, if that is the case, the limited partnership must have a resident agent located in that State. A and A Companies can act as your new limited partnership's resident agent in California, Delaware, Florida, Nevada, New York and Texas.
Limited Partnership Units
In order to complete its organization, a limited partnership should issue Limited Partnership Units. Limited Partnership Units represent ownership interests in the limited partnership. The limited partnership often issues Limited Partnership Unit Certificates to the owner of the Limited Partnership Units to evidence his or her ownership. A limited partnership can only issue Limited Partnership Units if it has received consideration for those Units. Typically, the initial limited partners of a Company contribute cash or services to the new business in exchange for their Limited Partnership Units.
Limited Partnership Term of Existence
By its very nature, a limited partnership is limited in duration (unlike most corporations). Typically, although not necessarily, limited partnerships are used in circumstances where the organizers want to establish a separate entity for purposes of a single project or task. Accordingly, please indicate in your Limited Partnership Application the number of years that you would like your new limited partnership to be in existence, after which it shall terminate automatically. If you do not state a different number of years in your Limited Partnership Application, A and A Companies will use 50 years as the duration of your new limited partnership.
General Partners
A limited partnership must have at least 2 partners. One must be a "Limited Partner" and the other must be a "General Partner". The Limited Partners are "silent investors" in the new company. They typically invest cash for their Limited Partnership Units. General Partners, on the other hand, are responsible for managing the limited partnership. All Limited Partners and General Partner(s) of a limited partnership must enter into a Limited Partnership Agreement in order to complete the organization of the limited partnership. At A and A Companies, we can prepare a Limited Partnership Agreement, tailored just for your new limited partnership.
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