A limited liability partnership (LLP) is one way to create a business. This type of business structure has at least two owners, called partners. While most states require all partners in an LLP to be general partners, Texas permits partners in an LLP to be either general partners or limited partners, although at least one partner must be a general partner. In other types of partnerships, general partners are completely involved in the management of the company, but they are wholly and personally liable for all of the company’s actions. Limited partners are not involved in running the company, but they have limited liability. With an LLP in Texas, general partners and limited partners still have their different levels of involvement as they would in another type of partnership, but all of the partners have limited liability.
In order to be an LLP in Texas, a company must meet a number of requirements. If a company is seeking to be a domestic LLP, meaning that it has not been registered as an LLP in any other jurisdiction, then it must be either a general partnership (GP) or a limited partnership (LP). A foreign LLP, which is a company that has been registered in another jurisdiction, is generally already an LLP in accordance with the laws of another jurisdiction when it seeks to register for the purpose of transacting business in Texas. Regardless if the company is seeking to register as a domestic LLP or a foreign LLP, the voting partners must vote to register as an LLP in Texas.
The name of an LLP must end in either the phrase ”limited liability partnership” or an abbreviation of the phrase, unless the LLP is being formed from an existing LP, in which case the name may end in the phrase “limited liability limited partnership” or an abbreviation of that phrase instead. As previously mentioned, the company must have at least two partners, and at least one of them must be a general partner. Additionally, any partnership seeking to operate as an LLP in Texas must file registration paperwork with the Texas Secretary of State. If the LLP is a foreign LLP, it will also need to find a resident of Texas or a company registered to do business in Texas that will consent to serve as the LLP’s registered agent, which means that they will agree to receive any legal documents on behalf of the company. Otherwise, a foreign LLP will be required to appoint the Texas Secretary of State as its registered agent.
A partnership may file the necessary paperwork by submitting a completed version of the appropriate form either online or via the mail. Domestic LLPs have to fill out a Registration of a Limited Liability Partnership. This form requires:
- The LLP’s name
- Either the partnership’s federal employer identification number (FEIN) or an indication that one has yet to be acquired
- The number of general partners
- The principal office’s street address
- A description of the business in which the partnership will be engaged
- An indication of when you want the registration to become effective
- The signature of a general partner if the original partnership was an LP, or the signatures of the partners who possess a majority-in-interest of the partnership or the signature of a partner authorized by those possessing a majority-in-interest if the original partnership was a general partnership
A foreign LLP must complete an Application for Registration of a Foreign Limited Liability Partnership. You must provide:
- The existing name of the LLP
- Any other name the LLP plans to use in Texas in the event that its preexisting name
- Either the LLP’s FEIN or an indication that the LLP has yet to obtain a FEIN
- The LLP’s original jurisdiction
- The date the LLP was originally created
- The number of general partners located in Texas
- The original jurisdiction and date of creation
- The address of the LLP’s principal office
- A description of the sort of business in which the LLP is involved
- The date on which the LLP plans to begin transacting business in Texas
- The LLP’s registered agent’s name and address
- Signatures from either the partners who have a majority-in-interest or by a partner appointed by those in possession of a majority-in-interest
An LLP’s profits are taxed through each partner’s individual income tax. Since Texas does not have a personal income tax, partners do not have to worry about paying income tax to the state of Texas for the portion of profits that they receive from the LLP of which they are a part.
Texas requires all LLPs to file an annual report. The filing fee for that report is $200 for each general partner present in Texas. LLPs registered in Texas are also required to pay a franchise tax that varies depending on the type of revenue that the LLP earns.
Registering your company as an LLP in Texas is not easy. Thus, it may be in your best interest to speak with a Texas corporate lawyer when going through the process of registering an LLP.