A limited partnership, or LP, is a specific way of setting up a business so that some partners are only financially responsible for the amount they have contributed to the business. While there are a number of different ways you can set up a business, such as an LLC or a corporation, an LP may be better for your business depending on the needs of your company. If you decide to form your business as an LP, you will need to register it as such with the Colorado Secretary of State.
When creating an LP in Colorado, one of the first things you need to decide is the name of your company. The state of Colorado requires all LPs to include one of the following in its name:
- Limited partnership;
- Ltd.; or
In addition, each LP must have at least two partners, and at least one partner must possess limited liability. You should be aware that general partners (the partners without limited liability) can be a person or another organization.
Another requirement you must fulfill is to select a registered agent who can be served in case of a lawsuit. A registered agent can be anyone over the age of 18 who lives or works in Colorado or any company that has a usual place of business in the state.
In order to register formally as an LP in the state of Colorado, you will need to file a Certificate of Limited Partnership on the Colorado Secretary of State’s website. When filling out the required paperwork, you will need to include information about, including the company name, principal office address, the name and address of the registered agent, and the name and address of the general partner(s). The form also requires that confirm that there are at least 2 partners and at least one of these partners has limited liability.
Finally, the Certificate of Limited Partnership must be signed by the person filling out the form. They must also put down their name and address as the person who is filing to create the LP. The requirements and paperwork needed to successfully create a limited partnership in Colorado can sometimes be complex. You may need to work with a legal professional for guidance during the process, to ensure that all steps are completed in a timely manner.
Under the Colorado Uniform Partnership Act, an LP can limit even a general partner’s right to manage and act on behalf of the LP. Thus, a Colorado LP can sometimes have an operating agreement that allows the company to operate more like a corporation, wherein the general partners may have different levels of responsibility and rights toward the LP. This is in contrast to a traditional partnership, where general partners share all rights and responsibilities toward the LP equally.
Another benefit of limited partnerships in general is that they are less subject to dissolution than in a normal partnership. Under LP rules, limited partners can withdraw from their role as a partner without resulting in a dissolution of the partnership as a whole.
Such an arrangement is possible because limited partners typically do not take a lead part in the company’s management. This is a valuable feature that can allow changes to be made in the structure of the business without resulting in a full termination or dissolution of the business operations.
Alternatively, limited partners can also sometimes change their role if they begin to take on a more active part in the company’s management. At this point, they might not be considered a limited partner anymore, but may function more like a traditional general partner.
The state of Colorado requires that all LP file annual reports within the financial quarter of their anniversaries. Additionally, Colorado charges a filing fee for every document that can be filed for an LP; most states only charge filing fees for certain documents and not for other documents.
Lastly, while an LP generally won’t be dissolved if a partner retires, withdraws from the partnership, or passes away, these types of situations can still cause legal issues or partnership disputes. These may depend specifically on what the partnership agreement specifies in such situations.
Thus, it may be necessary to have an attorney review the overall partnership agreement, so that all parties involved understand the consequences of a partner withdrawing or terminating their role with the company.
Forming an LP in Colorado can be a complex task. The assistance of a business lawyer in Colorado can be very helpful when forming your company as an LP. They can help answer your questions and ensure that you do not make any major errors when completing the necessary paperwork.