A limited partnership (LP) is a way of structuring a company that involves numerous owners, known as partners, to establish it. Limited partnerships are similar to general partnerships (GP). However, unlike a GP, in which all partners are general partners, an LP has two varieties of partners: general and limited. A general partner has the most amount of power over an LP. That power is distributed evenly to other general partners.
General partners are totally and personally liable for the LP. Limited partners are typically uninvolved with the business operations. Since limited partners are not responsible for the business operations, they are only directly responsible for the dollar amount they invested in the LP.
There are several important distinctions between general and limited partnerships, beginning with the partners’ functions. With a general partnership, the partners divide profits evenly and take identical responsibility for liability ― general partners are personally responsible for the company’s obligations and payments.
Limited partnerships have at least one general partner and one limited partner. A limited partner is a partner who does not share administrative duties. A limited partners’ liability is restricted to the quantity of cash they invested in the partnership.
Occasionally, you’ll hear limited partners referred to as “silent partners” due to their absence of direct involvement in the organization’s day-to-day functions.
Another fundamental distinction is that the general partnership is not a traditional business design, which means you don’t need to file formation papers with the state of Arkansas or pay any formation cost. The general partnership is assembled when the partners begin transacting trade jointly.
A limited partnership does have a standard formation process with the Arkansas state government. There is an additional formation expense associated.
What is Required to Open an LP in Arkansas?
A business cannot be an LP in Arkansas unless it meets some prerequisites. An LP must have at least one limited partner and one general partner. The name for the LP must have “LP,” “L.P.,” or “Limited Partnership” in its title. The name must be distinctive compared to names already given to registered businesses with just a few narrow peculiarities.
Another item that an LP must come up with is an agent for service of process. The agent must be an individual or other commodity competent to receive official communications and legal papers on behalf of the LP at a street address, not a post office box.
Furthermore, all LPs must file the proper paperwork with the Arkansas Secretary of State. A domestic LP, which is an LP that has only been documented in Arkansas, must furthermore locate and preserve an office in Arkansas that will hold several necessary records and other details related to the LP, such as duplicates of all of the LP’s financial reports for the past three years and documents of the LP’s three most current annual reports. Any LP created outside of Arkansas that wants to do business in the state, also known as a foreign LP, is excused from establishing and maintaining an office.
What is the Necessary LP Paperwork?
The appropriate paperwork must be filed with the Secretary of State of Arkansas by mailing the completed form to enlist an LP in Arkansas. Domestic LPs must mail in a Certificate of Limited Partnership. To achieve a Certificate of Limited Partnership, you will be instructed to put down the name and street address of both the LP and the agent for service of process. If the mailing address for either the LP or the agent differs from their street addresses, the mailing address must be listed. Each general partner must have their signature, title, and address on the form.
Foreign LPs must mail an Application for Certificate of Authority of Foreign Limited Partnership. This document will direct you to supply the name of the LP and any other title that the LP may utilize in Arkansas if the LP’s actual name does not satisfy the state’s name requirements. You will have to reveal where and when the LP was initially formed and the type of trade the LP will entertain.
Further, you will need to deliver the names and addresses of the general partners and the agent for the service of process. Unlike the Certificate of Limited Partnership, which demands all of the general partners’ signatures, the Application for Certificate of Authority of Foreign Limited Partnership exclusively must be signed by one general partner. In addition to mailing in the Application for Certificate of Authority of Foreign Limited Partnership, a foreign LP must also send in a certificate of existence.
What are the Pros of Opening an Arkansas LP?
Aside from the filing price for the yearly report, Arkansas does not demand LPs to pay an annual tax or other annual expenses. Arkansas also delivers multiple monetary motivations to businesses located in the state. These inducements range from tax credits, such as the InvestArk and Tax Back sales and use tax credits, to grants, such as those presented by the Arkansas Risk Capital Matching Fund and the Seed Capital Investment Program for tech-based companies.
Are There Any Disadvantages to Opening An Arkansas LP?
Arkansas mandates all LPs to file a yearly report, which must be submitted along with a filing fee of $15 by May 1. If an LP does not file the information within 60 days of the May 1 deadline, the Arkansas Secretary of State may administratively disband the organization.
How Can I Choose an LP Name?
Whereas the state of Arkansas authorizes general partnerships to use the individual names of the partners, that is not a possibility for limited partnerships. LPs must have a distinct business name.
Your limited partnership’s moniker is usually the first imprint you get to make on possible clients, and accordingly, it goes without saying that this is an essential stage. There are a few additional factors to take into concern when picking a name for your company:
Legalities
All limited partnerships in the State of Arkansas must contain one of the ensuing terms or abbreviations in their company title: “limited partnership,” “L.P.,” or “LP.” In addition, you cannot include any terms that refer to other company classes (like “corporation” or “incorporated”). You are not permitted to use phrases typically used to refer to distinct types of companies (like “bank” or “law firm”).
Finding a Good Name
Another factor to weigh is including verbiage that clarifies what your company does ― for instance, if you’re an investor, put the phrase “investments” in your LP title. Also, if your company has assertive values like being environmentally conscious, you can demonstrate that by having the word “green” in your title.
Choose a Name That You Like
This is your company, and you should pick a title that makes you happy. You should also make sure your limited partnership’s title sounds pleasing when spoken aloud and looks satisfactory when written down.
The most crucial consideration for designating an LP is not getting too tied to any company name until you have either secured the name with the state of Arkansas or officially started your company.
You can inspect whether your chosen company title is open by running a business entity search on the Arkansas Secretary of State’s website. Once you have decided that your chosen company name is open, you can file an Application for Fictitious Name with the Arkansas Secretary of State. Once your application has been endorsed and reciprocated to you, you must also file it with your local county clerk’s office.
If you are not prepared to form your LP, you may reserve your company title for 120 days by filing an Application for Reservation of Corporate Name.
How Do I Buy a Business Domain?
To completely adopt the company title, register your URL. Use a business domain service to build a company website and ensure nobody else takes your business name.
Where Can I Find the Right Lawyer?
Establishing an LP in Arkansas can be complicated, and having a lawyer to assist you can be invaluable. You can find an Arkansas corporate lawyer to help you set up your LP.
