An LP or Limited Partnership is a way of structuring a business that provides limited liability to its members (partners) but also the structural and tax flexibility of a partnership. The limited liability aspect of the LP protects the assets of its limited partners from the debts, losses, and legal claims related to the limited partnership but not the assets of general partners. Also, like partnerships, LPs are free of many of the organizational requirements of a corporate and corporation taxes.

What are the Requirements for an LP?

An LP can only be formed under state law. As a result, the requirements and protections for LPs can vary widely from state to state.  While there is a lot of flexibility in creating and structuring LPs in New York, there are a few mandatory requirements:

  • Choose a Name for the LP.  This name must be different from all other business names on record at the New York Department of State and must include either “limited partnership,” or the abbreviation “L.P.”
  • Signature of General Partner.  All LPs must have at least one general partner that is personally liable for the actions of the LP.
  • Certificate of Limited Partnership. The Department of State provides PDF fillable Certificate of Limited Partnership. This document requires the name of the LP, the county the LP’s office is located, a business address to forward notice of legal process, and general information on all general partners.
  • Partnership Agreement. New York requires a partnership agreement to be attached to the Certificate of Limited Partnership filed with the Department of State. There is no standard for a required partnership agreement but it is a good idea to resolve issues such as partner contributions, distribution of profits, partners’ authority, etc.
  • Certificate of Publication. New York requires new limited partnerships to publish a copy of the certificate of limited partnership in at least 2 newspapers within 120 days of filing the certificate with the Department of State.  Afterward, a certificate of publication must be filed with the department of state with affidavits from the editor of each newspaper.

What Paperwork Do I Need to form an LP?

The forms required to form your business as an LP can be found on the Department of State website. The Certificate of Authority along with a processing fee can be filed with the Department of State, Division of Corporations.

What Benefits Does New York Give to an LP?

There are several reasons why you might want to structure your business as an LP:

  • Limited Liability: Like a corporation, LPs shields the personal assets of its limited partners from the debts and legal liability of the company.  However, a limited partnership must have at least one general partner that is personally liable for all claims made against the LP.
  • Pass-Through Tax Entity: LPs are taxed as a pass-through entity and avoid the double tax associated with corporations.  This means that the LP itself is not taxed.  Instead, partners are taxed according to their individual tax bracket when they receive a share of the LPs profits.
  • Biennial Report: LPs are not required to file biennial reports in New York.
  • Survivability: Unlike a general partnership, LPs do not have to be reformed every time a partner dies.
  • Late Filing: An existing general partnership can convert to a limited partnership at any time if it fulfills the requirements listed above.

What Disadvantages Does New York Give to an LP?

While the limited liability an ability to avoid the double tax associated with corporation can be appealing, there are a few disadvantages to structuring your business as an LP:

  • Filing and Fees: Unlike a general partnership or sole proprietorship; LPs require filing formation forms and payment of some administrative fees which can cost upwards of $250 for initial filing and may require hiring lawyer.
  • General Partner Liability: Unlike a limited liability company or a limited liability partnership, a limited partnership requires at least one general partner that is personally liable for the claims made against the LP.

Should I Hire a Business Lawyer?

If you are looking for an attorney to help you with structuring your business, then contact a New York corporate lawyer today to get the help you need.