A Limited Partnership (LP) is a business structure that is popular because, just like a corporation, the limited partners have limited personal liability from the claims of the creditors of the LP. A limited partnership affords more flexibility in the sharing of profits and losses than an s-corporation. The allocation of profits and losses among the partners is in accordance with the partnership agreement. A limited partnership is made up of at least one limited partner and one general partner. The general partner does not enjoy the benefit of limited liability. However, the general partner does have management authority. The limited partners are strictly investors with no day to day management authority.
Limited partnership formation requires filing the appropriate "Certificate of Limited Partnership" generally with the state and or county agency.
The Certificate of Limited Partnership requirements vary from state to state.
The partnership name must be distinguishable from the name of any other LLC, corporation, limited partnership, or company incorporated, organized or authorized to transact business, in that State. The specific state fees must be paid to the state before the corporate filing will be accepted by that state.
Depending upon the state, there are unique procedures along with accompanying cover letters, and specific documentation to be submitted.
Limited Partnerships are taxed just like conventional partnerships. The individual partners share of profits and losses are determined by reference to the partnership agreement. The individual share of the partnership profit or loss flows through and each partner. Each partner recognizes their share of the profit or loss on their individual tax return and pays the tax accordingly.