There are several business structure options available for business owners when setting up their company. These can include sole proprietorships, limited liability companies (LLC), and limited partnership (LPs).
A main benefit of choosing an LP over other business structures is that a limited partner can protect their money at least up to the amount they put into the business, but a limited partner is not allowed to run the LP.
Instead, running the company is left to the other type of partner in the LP, which is a general partner. General partners are heavily involved in the operations of the LP; as such, they are completely liable for the LP. In Vermont, you can only have an LP if the company is registered as an LP with the Vermont Secretary of State.
Companies must meet a number of requirements in order to become and LP. For example, the company’s name needs to include either “L.P.” or “Limited Partnership.” The organization also has to have at least one general partner and one limited partner.
The LP must have an office in the state of Vermont. It also has to appoint an agent for service of process who is either a resident of Vermont or authorized to do business in Vermont. This agent is the person who will receive and process any paperwork for the LP related to lawsuits or legal issues.
You may register your business either online or by sending the application into the Office of the Vermont Secretary of State via mail. There are two types of forms for LPs: Certificate of Limited Partnership and Registration of Foreign Limited Partnership.
The Certificate of Limited Partnership is for LPs that are being created for the first time, also known as domestic LPs. The Registration of Foreign Limited Partnership is for foreign LPs, which are LPs that were originally established in another state or country and now wish to operate in Vermont.
In order to complete the Certificate of Limited Partnership, you will need to provide the name of the LP as well as the address of its main office in Vermont. The form also requires you to state a specific date the LP will end (if known) and a general description of the business. You must also include registered agent’s name and address, as well as the address for their office for service of process.
The form also requires the names and addresses of all partners, both limited and general. For all of the limited partners, you need to provide information regarding their initial capital contributions.
The form for Registration of a Limited Partnership has several of the same information requirements as the Certificate of Limited Partnership form. However, you do need to include the state where the LP was created, as well as the date on which the LP was originally formed. Also, you will not be required to provide any information about the limited partners.
Vermont does provide some incentives and benefits that apply to business, including a LPs. The Vermont Employment Growth Incentive (VEGI) program provides funds for businesses that need money to provide economic growth that would not be possible without the program. The state also has tax credits for businesses conducting research and development in Vermont, and for businesses that invest energy, coal, or gas projects.
A main benefit of LPs in general is that they can be less subject to immediate dissolution than a normal partnership is. Under the rules governing limited partnerships, the limited partners can withdraw from their role with the partnership dissolving as a result. This type of feature can allow long-term changes to be made in the business without causing a stop or delay in the business operations.
On the other hand, limited partners may sometimes have their role shifted if they begin to be more active in the company’s management. Here, they might function more like a traditional general partner rather than a limited partner.
The state of Vermont has one of the highest personal income tax rates at 8.95%. This may affect LPs negatively because their profits are taxed through the partners’ personal income tax. Vermont also enforces a business entity tax that requires LPs to pay a minimum of $250 per year. Finally, an LP is required to file an amendment to its paperwork with a new termination date if it wants to continue on beyond its original stated termination date.
Finally, LPs will not generally dissolve if a limited partner retires or withdraws, but these types of incidents can still result in partnership disputes or other business challenges. These situations can depend on what the partnership agreement or contract specifically says, so it may best to have an attorney review any agreements in place.
If you are considering forming an LP in Vermont, you should reach out to a Vermont business lawyer. They can help you register your LP and fill out all of the required paperwork so that your LP is legal. Your attorney can also provide representation if you are facing any legal disputes or conflicts.