A limited partnership is an entity formed to conduct a for-profit business and is comprised of a least one general partner and at least one limited partner. The partners may be persons, corporations or partnerships and their business relationship is spelled out in the operating agreement. As your College Station limited partnership attorney will tell you, the primary advantage of a limited partnership is the limited liability for business debts afforded some of the partners.
Limited Partnership Basics
The general partner makes the business decisions for the company, runs the day-to-day operations and is personally liable for the debts of the company. The limited partners are passive partners, have no management say and their exposure for business debts is limited to the amount of their investment in the company.
The ease of start-up is an initial advantage; all that is necessary is the filing of a certificate of formation with the Texas Secretary of State. The partnership agreement is not filed as a public record. The daily operations run smoother as the general partner need not consult with the limited partners for most business decisions. Additionally, there are tax benefits. Profits and losses in a limited partnership flow through the business to the partners, who are taxed on their personal tax returns. Limited partners can be replaced without disruption to the business and new limited partners can be easily attracted by the potential as an investor without liability. Limited partnerships can often be used as an estate planning tool to reduce the value of the assets in an estate.
The liability of the general partner is the primary disadvantage. If the business is sued or enters into bankruptcy, the general partner is responsible for all debts and liabilities. Where there is more than one general partner, a potential disadvantage is that any one general partner can act on behalf of the partnership and can enter into binding agreements without the consent or knowledge of the other general partner(s). A College Station limited partnership attorney can help you lessen some of these disadvantages.
Contact a College Station Limited Partnership Lawyer for Legal Advice
Determining the best type of entity for a new business can be confusing but it is an essential first step that will have a long range impact. Get the facts from experienced and knowledgeable counsel. Call the Peterson Law Group at 979-703-7014.