Limited Partnership (LP)
A Limited Partnership has many similarities to a LLC, but some important differences. Every party to a LP is considered a Partner; one or more are usually designated as General Partners with manager-level responsibilities. Any party designated a General Partner must be formally named, and if there is a change in General Partners that must be made public through an amendment to the partnership form. One important distinguishing characteristic of a LP is that not only individuals but other corporations can be designated as partners. When two corporations form a LP, it is sometimes referred to as a joint venture. A Delaware LP provides tax flexibility in distributions which can be a valuable tool when dealing with wealth transfers and estate planning.
In other ways, LP's resemble LLC's in the level of protection they afford against individual liability, the simplicity of incorporation and tax advantages.
Key Points of Limited Partnership:
- LP agreement eliminates directors, officers, minutes, bylaws and meetings unlike a corporation
- A members/owners creditor cannot get control of the members/owners voting rights or assets
- “Freedom of contract” guarantees flexibility with a Delaware LP
- Members and owners personal liability is limited to the amount invested in the company, just like a corporation
- Some tax advantages if partnership tax is elected on the SS-4 form