Limited partnerships (LP) are a type of business structure besides of corporations or LLCs. With an LP, you are able to protect the assets of the limited partner. This is because limited partners are only liable up to the amount of money they contributed to the business in the event of a lawsuit against the LP, or if the LP incurs debts that it not able to repay.
In addition, a general partner, who is personally liable for the LP, is primarily responsible for the day-to-day operations of LP, while a limited partner is more hands-off. Most states only have one type of LP.
Nevada is unique in that is actually allows two different kinds of LPs. One type of LP, known as an 88 LP, is governed by Chapter 88 of the Nevada Revised Statutes (NRS). The other type is known as an 87A LP and is governed by Chapter 87A of the NRS. Since Chapter 88 is older than Chapter 87A, it has stricter rules and a stronger division between the roles of limited partners and general partners.
All LPs must choose which body of law they want to be governed by, as each has its own filing requirements and form. Regardless of the type of LP a company wants to be formed as, they must register as such with the Nevada Secretary of State.
First, you must determine if you want your LP to be governed by Chapter 87A or Chapter 88 under Nevada laws. While they have many of the same requirements, Chapter 88 requires for you to determine a dissolution date for your LP, while Chapter 87A allows for your LP to exist forever.
Both types of LPs require that you select a business name that includes the words “Limited Partnership,” “L.P.”, or “LP”. Your LP also needs to designate a registered agent who can be served on behalf of the LP. Finally, and perhaps most importantly, your LP needs to have two types of partners: general and limited.
As previously mentioned, there are different forms that must be filed for an 87A LP and an 88 LP. Additionally, there are separate 87A and 88 forms for registering foreign LPs (foreign LPs are those that were formed in another state or country. All of these forms should be mailed to the Nevada Secretary of State’s Office, along with the Initial List of General Partners form.
Just as the requirements for an 87A LP and an 88 LP are similar, the forms for a domestic 87A LP and a domestic 88 LP require much of the same information. Both types of domestic LPs must file a Certificate of Limited Partnership; however, you should be sure to fill out the one specifically designated for the type of LP that you desire.
With both forms, you will be required to list the names and addresses for the LP and the initial general partners. You must also include the names, addresses, and signatures of both the organizer(s) of the LP and the registered agent.
For the Certificate of Limited Partnership for an 88 LP, you will also need to list a dissolution date for the LP. While you can also include a dissolution date for an 87A LP, you can choose to leave that blank; which will indicate that the LP has the option to continue in perpetuity.
A foreign LP is required to file an Application for Registration of Foreign Limited Partnership for either an 88 LP or an 87A LP, depending on how the foreign LP wishes to be governed. The information required for both forms are the same. This means that you do not have to list a dissolution date for either type of foreign LP.
For both kinds of foreign LPs, you must include:
- The names and addresses of the LP, as well as its general partner(s);
- The name that the LP will be using while transacting business in Nevada;
- The date and location of the LP’s original formation;
- The signature of the general partner who is filing the paperwork; and
- The name, address, and signature of the LP’s registered agent located in Nevada
The requirements for forming an LP in Nevada can be exhaustive; it may be in your best interests to work with an attorney who can review all the requirements to ensure a successful filing.
A major benefit of forming an LP in the state of Nevada is that there is no personal income tax in Nevada. This means that you will not have to pay any taxes on profits for your LP,because the profits are only taxed once as part of your personal income.
Also, limited members of 87A LPs are permitted under NRS Chapter 87A to manage the LP without having to sacrifice the liability protections that they enjoy as limited partners. However, keep in mind that this is not a freedom given to limited partners belonging to an 88 LP.
One disadvantage of registering in Nevada is that an LP needs to file a list of all of its general partners and a state business license application each year. While both annual requirements can be satisfied with one form, they have separate filing fees.
The fee to file the annual general partnership list is $150, and the fee to file the annual application for a state business license is $200. This means your LP needs to pay $350 in fees each year in addition to filing paperwork annually.
In addition, if a limited partner terminates their relationship with the business, it can result in various legal issues and disputes. While the termination won’t necessarily dissolve the partnership, it can present some challenges for the business. In such instances, it may be necessary to revise or review the partnership agreement to determine how such terminations might affect the business.
Deciding which type of LP is best for your company and completing all of the necessary requirements can be challenging. However, hiring a business lawyer to help you create and register your LP with can make the process easier.