Business Entities at the State Level: Limited Partnerships
As promised, this week’s blog is going to discuss limited partnerships. We will discuss what a limited partnership is, how a limited partnership works, and who would benefit most from filing their business as a limited partnership. The limited partnership is very similar to the general partnership aside from one key difference.
In a limited partnership, the management of the partnership rests with the “general partner”. The general partner also holds ultimate liability for the company’s debts and liabilities, meaning that in a lawsuit the general partner’s personal assets could be reached. The limited partnership also allows “limited partners”. The liability of a limited partner is limited to their investment to the company.
As a result, the limited partners are very often have little to no voting power or control over how the partnership is ran. In most scenarios, limited partners are often treated as investors due to their limitations on liability and the ability to always recruit new limited partners. Most limited partnerships are often companies where the business focuses on time-sensitive projects such as attorneys, accountants, and finance firms. Limited partnerships often register with the respective Secretary of State by filing a Certificate of Limited Partnership. Much like general partnerships, profits and losses pass through to the partners proportionate to their income tax rate.
If you have any other questions about whether filing a limited partnership is right for you, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions. Please contact us at (618) 997-3436.