How to Form a Limited Partnership

Limited partners invest in a company but are not involved in the management of the business. They assume only limited liability.

Instructions

Difficulty: Moderately challenging

Things You’ll Need:

• Assumed Name Certificates
• Business Books
• EIN
• SBA Licenses
• Banks
• Business Loans
• Legal Services

1. Obtain all required local, state and federal licenses and permits. Contact the Small Business Administration to find out which ones you'll need.
2. Get an Assumed Named Certificate by registering a business name in the county where the company does business. The words "Limited Partnership" must be contained in the name of the partnership.
3. Get an Employer Identification Number from the IRS using Form SS-4.
4. Obtain a State ID Number as well from the state Department of Revenue.
5. Write a partnership agreement that addresses profit sharing, asset distribution, participation rights, dissolution prevention, a buy-out agreement, asset appraisal and expulsion or addition of partners. It's advisable to engage the services of an attorney in drafting up such a document.
6. File a Certificate of Limited Partnership with the Secretary of State.

Tips & Warnings

• General partners are personally liable for all debts, while limited partners are only responsible up to the value of their investment in the partnership.
• All partners report profits and losses on their individual income tax returns.
• If a limited partner gets involved in managing the company, he or she may become personally liable for all debts.