How to Form a Limited Partnership (LP) in Maine

There are several different types of business management structures that a new business owner can choose from when organizing their company. Importantly, the type of business management structure dictates how a business will be taxed and operate.

Some of the most common types of business management structures include, but are not limited to:

• Sole Proprietorships: Sole proprietorships are businesses that are formed by a single owner. Sole proprietorships do not need to be registered with the state. However, sole proprietorships are considerably simple to register, should the business owner choose to do so. The advantages and disadvantages of sole proprietorships include:
  • The lack of paperwork and minimal procedural requirements, making sole proprietorships a simple and inexpensive option.
  • As there is only one owner of a sole proprietorship, sole proprietors are held responsible for all management aspects of the company.
  • Sole proprietors may also be held liable for any risks or liabilities that are incurred by their business.
• Corporations: A corporation is a legal entity that is regulated by state law, and is considered to be separate from the shareholders of the company. This means that only the corporation itself can be held liable for debts and liabilities, not the shareholders.
  • There are many different types of corporations, classified in accordance with specific factors such as their purpose, the number of company shareholders, the amount of stock that is to be issued, and the corporation’s overall tax structure. Some standard forms of corporations include:
    • C corporations;
    • S corporations;
    • Professional corporations;
    • Foreign corporations;
    • Non-profit corporations; and
    • B corporations.
• General Partnerships: A general partnership is typically formed by two or more people who wish to be co-owners of a for-profit business. This means that as long as both parties intend to make money from a product or service that they offer, they will be considered to have entered into a general partnership.
  • One of the main disadvantages of a general partnership is that general partners can be held both individually and jointly liable for any losses or debts that are incurred by the partnership. Additionally, general partners can be held liable to the other partners if they breach their fiduciary duty to the business or to third parties.
• Limited Partnerships: In contrast to a general partnership, a limited partnership has considerably stricter requirements than that of a general partnership. Limited partnerships must have at least one general partner that oversees and manages the company, as well as at least one limited partner.
  • Limited partners will have limited authority over the partnership, and can only be held liable to the extent of their investment.
  • Similar to general partnerships, the named general partners involved in a limited partnership can be held both jointly and individually liable for their company’s debts and risks.
• Limited Liability Partnerships: Limited liability partnerships provide all partners with the same obligations and financial rights as those included in general partnerships. However, in limited liability partnerships, the partners are required to register the business with the state.
  • An advantage of a limited liability partnership is that it offers the benefit of being free from the debts and liabilities of other parties and the partnership itself, with each partner remaining liable for their own actions as well as any conduct that they personally supervise or demand.
• Limited Liability Companies: Limited liability companies are a business structure that combines the tax arrangements and management styles that are used in partnerships with the liability benefits that are found under a corporation.
  • Members of a limited liability company cannot be held responsible for any debts that are incurred by the business.
  • Limited liability companies also allow members to choose how they wish to be taxed.

What Is a Limited Partnership?

As noted above, a partnership is a business structure that consists of an association of two or more people that intend to carry on as co-owners of a business for profit. A partnership is formed when the parties to a business have the ability to share in the profits, and each have the right to control the business in some way. The type of partnership that is formed will largely determine the amount of liability that an individual partner may face as part of their ownership of the partnership.

A limited partnership is a specific type of business partnership that allows its limited partners to receive specific legal protections and rights. These legal rights act as protection for the limited partners against individual liability claims of the partnership for reasons such as debt, losses, and/or violations that are directly associated with the overall limited partnership.

Once again limited partnerships differ from that of a general partnership in that each partner in a general partnership is individually and jointly responsible for the losses that are incurred by the partnership. Being liable for the partnership can sometimes put partners at a disadvantage, especially if they only play a minor role in the overall partnership.

Although it is called a limited partnership, each limited partnership still requires at least one general partner in order to be considered proper. The general partner will be responsible for making management decisions for the limited partnership, as well as being responsible for the limited partnership’s day to day operations.

A limited partner will have limited powers over the partnership, and as such they can only be held responsible to the extent of their investment in the limited partnership. Because of this, limited partners are largely responsible for only their investment duties associated with the limited partnership.

What Paperwork Do I Need In Order To Form An LP In Maine?

In order to properly form an LP in Maine, the following is required:

• Choose a Name for the LP: The first step in forming an LP in Maine is to choose the name for the LP.
  • It is important to check the chosen name of the LP to ensure it is not being used by another business entity and that it is unique from other business entities in Maine.
  • Every limited partnership in Maine is required to include either “Limited Partnership”, “LP” or “L.P.” in their limited partnership name.
  • Business owners may also reserve a name by filling out an “Application for Reservation” and paying a filing fee.
• File a Certificate of Limited Partnership: Next, in order to form a Maine Limited Partnership, the partners must file a document with the Maine Secretary of State called a “Certificate of Limited Partnership” and pay the accompanying filing fee.
• Registered Agent: Maine also requires that all partnerships have a registered agent within the State.
  • Registered agents may either be a Maine resident or a business that has a physical address within the state.
• Structure of Partners: Maine law does not limit the number of partners in an LP, but Maine does require that limited partnerships have at least one general partner and at least one limited partner.
• File Annual Reports: Unlike other states, the State of Maine requires all LPs to file annual reports to continue operating the LP.

Do I Need an Attorney for Help With Forming a Limited Partnership in Maine?

If you are considering forming an LP in Maine, you should contact an experienced Maine corporate lawyer. An experienced business attorney can help you understand which business structure is best for your business, as well as help guide you through the LP formation process.

Additionally, an attorney will also be able to represent you in court as needed. Further, should any legal issues arise regarding your partnership, an attorney may also represent your interests in court, as needed.