A limited partnership (“LP”) 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.
In Rhode Island, the Rhode Island Uniform Limited Partnership Act governs the Rhode Island limited partnerships.
In Rhode Island, the requirements to form an LP are the following:
- File a Certificate of Limited Partnership: To form a Rhode Island Limited Partnership, the partners must file a document with the Rhode Island Secretary of State called “Certificate of Limited Partnership” (Form 300) 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 Rhode Island. You can also reserve a name by filling out an Application for Reservation and paying a filing fee.
- Registered Agent: Rhode Island requires that all partnerships to have a registered agent within the State.
- Partner Requirement: Rhode Island 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 Rhode Island requires all LPs to file annual reports and pay a filing fee with Secretary of State.
To form a Rhode Island Limited Partnership, the partners must file a document, and pay a filing fee, with the Secretary of State called “ Rhode Island 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
Once the limited partnership is formed, the limited partnership’s partnership agreement and RIULPA govern the operation and management of the limited partnership.
Rhode Island has a set of record keeping requirements that limited partnerships must follow:
- Each limited partnership shall keep at the office referred to in ORS 70.020 the following records:
- A list of the full name and business address of each partner
- A copy of the certificate of limited partnership and all certificates of amendment
- Copies of the limited partnership’s federal, state and local income tax returns if any
- Copies of any written partnership agreements and of any financial statements of the limited partnership for the three most recent 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 Rhode Island 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 Rhode Island corporate 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.