Limited Partnerships combine the limited liability benefits of incorporating with the pass-through taxation of partnerships. Limited Partnerships may be the best vehicle for business formation if liability can be vested in one person, the General Partner. At least two persons are required to form a Limited Partnership - one General Partner and one Limited Partner. Each Limited Partner is limited in liability to the amount of capital contributed, and items of profit and loss pass through to the individual. Limited Partnerships are formed and managed by the General Partner(s), and Limited Partners are not required for the organization. Limited Partners do not participate in the operation of the partnership. Because partners’ interests may not be freely traded, Limited Partnerships should not be formed if liquidity of investments is desired.

Subsequent persons may be admitted as General Partners or Limited Partners, pursuant to established partnership agreements or to unanimous consent. The contribution and distribution of capital is generally allocated in the partnership agreement. Changes in the allocation may be made by unanimous consent or as stipulated in the partnership agreement. Limited Partnerships can not operate in perpetuity; a dissolution date must be submitted at the time of organization. The aforementioned characteristics of a Limited Partnership should be compared to those of a Limited Liability Company when deciding which business entity best fulfills your needs.

Please see Limited Liability Company Organization for further information to help determine which entity is appropriate for your situation.