A limited partnership is a specific type of business partnership that enables each partner to achieve legal protection against individual liability for the debts, losses, and violations related to the overall partnership. Limited partnership are different differs from other partnerships since it allows all partners to have limited liability. This limited liability depends on the individual partner’s investment contribution to the business. In addition, one or two partners known as general partners run a limited partnership venture.
Pennsylvania limited partnerships are governed by the Pennsylvania Revised Uniform Limited Partnership Act. 15 Pa.C.S. §8501.
In Pennsylvania, the requirements to form an LP are the following:
- File a Certificate of Limited Partnership: To form a Pennsylvania Limited Partnership, the partners must file a document with the Pennsylvania Secretary of State called “Certificate of Limited Partnership” and pay a filing fee.
- Check the Name of Your Limited Partnership: You must also name the LP and be sure to check that the name of the LP is not used and unique from other business entities in Pennsylvania. You can also reserve a name by filling out a Application for Reservation and paying a filing fee.
- Registered Agent: Pennsylvania requires that all partnerships to have a registered agent within the State.
- Partner Requirement: Pennsylvania law does not limit the number but does require that limited partnerships have at least one general partner and at least one limited partner. The general partner will have control of day to day activities
- File Annual Reports: Unlike some states, the State of Pennsylvania requires all LPs to file annual reports and pay a filing fee with Secretary of State.
To form a Pennsylvania Limited Partnership, the partners must file a document, and pay a filing fee, with the Secretary of State called “ Pennsylvania Certificate of Limited Partnership”. The certificate must state the following:
- Name of the LP
- Address of office of LP
- Address of the agents of LP
- Name and Address of each partner of the LP
In a limited partnership, only the limited partners have the benefit of limited liability. Under the Pennsylvania Revised Uniform Limited Partnership Act, the limited partnership have to have following documents at their registered office or their principal place of business:
- The name and address of each partner;
- A copy of the certificate of limited partnership
- Copies of the limited partnership’s Federal, State and local income tax returns and reports for the last 3 years; and
- Copies of any written partnership agreements and of any financial statements of the limited partnership for the last 3 years.
There are several benefits of having a limited partnership in Arizona. These benefits are:
- Limited Liability: Limited partners who form an LP and contribute money only face limited liability. This means that if the business goes bankrupt, the limited partners would only be liable up to the amount of money they invested or contributed to the business and nothing more.
- Tax Benefits: The profits and losses in an LP flow through the business to the partners, all who are taxed on their personal income tax returns and get to share the profits and losses.
- Less paperwork: An LP has less paperwork than formation of a corporation.
Limited partnerships in Pennsylvania can have some disadvantages. Some of these are that Limited partnerships have less of a say in the business than the general partners. If they begin to become active in the LP, the general partners see this as a risk. In addition, unlike the general partners in the business, limited partners income are not considered for tax purposes so they usually have to pay self-employment tax.
The law surrounding the requirements and protection of limited partnerships are complicated. The facts of each case and limited partnership can be unique. Limited Partnership laws can vary from state to state. It’s in your best interests to hire local Pennsylvania business lawyer if you need help with the limited partnership laws in your area. Your attorney will be able to assist you with tasks such as filing, creating documents, and negotiating partnership agreements.