A limited partnership, known as an “LP”, is created when a general partner and limited partner combine their resources and efforts to pursue a business objective. A limited partner typically injects cash or assets into the business venture. On-the-other-hand, the general partner is typically responsible for the day-to-day operation of the business. In general, LPs are designed to protect the investors from the debts and obligations of the business in which the limited partner invests.
The requirements of conducting a business as an LP are low when compared to the requirements associated with some other business entities, such as a corporation. Some of the key things that an LP must have include:
- a named registered agent,
- an initial notice of doing business,
- annual reports (for tax purposes), and
- a tax identification number.
Contact a lawyer today if you have questions about the formation of your LP. Failing to comply with the laws of New Jersey can result in entity losing the legal protections that are granted to LPs.
New Jersey has created the New Jersey Business Action Center (BAC) to manage the filing of paperwork for businesses within the state. The BAC allows businesses, including LPs, to:
- register as a new business,
- change tax records,
- amend incorporation documents,
- file annual reports,
- reinstate a revoked business, and
- dissolve a business entity.
The BAC is valuable resource for those seeking to do business in New Jersey and there are many other additional services that the BAC provides that are not listed here.
The most basic benefit that LPs provide is personal taxation. LPs are generally not taxed at the business level. Rather, income of the LP is taxed at a personal level. This avoids “double taxation”. Despite being taxed at a personal level the debts and obligations of the LP generally remain those of the LP and the partners to the LP are not personally liable for those debts and obligations.
LPs are governed by the laws and regulations of the New Jersey but they are also controlled by any internal documents – such as operating agreements – that are agreed upon by the limited and general partners of the LP. Establishing proper rules for conducting the LP is critical but can be time consuming. It is very important that each LP have clear rules for how the LP is to be managed.
If you are trying to form a limited partnership, then contact a local New Jersey business lawyer for the help you need. They can answer any questions and help you figure out the next step to form your LP.