It is important to understand a partnership in general before understanding what a limited partnership is.
A partnership is an association of two or more persons to carry on a business for profit as co-owners. In a partnership, the partners share profits and control the business. The parties will then be considered partners.
There are three types of partnerships: general partnerships, limited liability partnerships (LLPs), and limited partnerships. The type of partnership that was formed will determine the amount of liability that an individual partner may face as part of the partnership.
What Is an LP?
A limited partnership (LP) is one way to set up a business aside from a corporation. There are two or more partners in an LP, and at least one is personally liable only for the amount they put into the business. A limited partner has limited liability, and a general partner has full liability for the company. A company must register with the Georgia Secretary of State to conduct business as an LP in Georgia.
What Are the Requirements for an LP?
LPs can be registered with the state by reserving a name, but the reservation only lasts 30 days. It is required for the business to name a registered agent who can receive paperwork and be served in case of lawsuits. An LP must have at least one general partner and one limited partner.
What Paperwork Do I Need to Form an LP?
You can register your LP by either filing a Certificate of Limited Partnership online or mailing a completed Certificate of Partnership along with a completed Transmittal Form 246. The Certificate of Limited Partnership must include the LP’s name and the registered agent’s name and address. Registered agents must have a street address, not a PO Box.
The general partner’s name and address must also be listed.
The form must be signed by all general partners, although a lawyer may sign on behalf of any partner.
Is it Possible to Withdraw From a Limited Partnership?
Unlike a general partnership, a partner in a limited partnership may withdraw from the business without subjecting it to an automatic dissolution. An important feature distinguishing a limited partnership from a general partnership is its limited liability.
To withdraw from a limited partnership, a limited partner must notify the partnership and file the necessary paperwork (i.e., withdrawal documents) with the State. In addition, the remaining partners in the limited partnership will have to buy out the withdrawing partner.
When a partner withdraws from a general partnership, the partnership will usually dissolve (terminate). Likewise, a general partnership can dissolve if one or more partners dies or becomes incapacitated.
What If I Have a Dispute That Involves a Limited Partnership?
As discussed above, all three partnerships are differentiated by the amount of liability attributed to each partner. This will help determine who should be responsible for the partnership’s financial losses.
The liability of limited partners is normally limited to the amount of their investment in the limited partnership. In contrast, if a partner acts outside of their duties as a limited partner, they will likely be held personally liable for any injuries or losses.
If a limited partner acts like a general partner and makes management decisions or represents themselves that way to a third party, then they could be held personally liable.
On the other hand, if the limited partner acted within the scope of their duties, which are usually set forth by the terms of an entity’s partnership agreement, it is more likely that the overall limited partnership will be responsible for any injuries or losses that result.
Multiple partners in a partnership can be jointly liable for the partnership’s debts or damages awarded to a plaintiff. Based on the facts surrounding the case and the liability agreement entered into by the partner and their partnership organization, this will depend on the case’s specifics.
Choosing an LP Name
Georgia allows general partnerships to operate under the individual names of the partners but not limited to partnerships, which must have separate business names.
The name of your limited partnership is often the first thing potential customers see, so it’s important to get it right.
When selecting a name for your business, you need to consider a few factors:
Legalities
Georgia limited partnerships must include a designation at the end of their business names that indicates their partnership type. Furthermore, you cannot use words that refer to other business types (such as “corporation” or “incorporated”) or words that are usually used to refer to specific kinds of businesses (such as “bank” or “law office”).
Descriptive Naming
Include language that describes what your business does. For example, if you’re a realtor, include “real estate” in your LP name. Furthermore, you can include “green” if your business has strong environmental values.
Is it to Your Liking?
This is your business, so choose a name that makes you proud. Ensure your limited partnership’s name is grammatically correct and visually appealing.
If you’re naming an LP, you should not get too attached to any one name until you’ve either reserved the name with the state of Georgia or formed your company.
To determine whether your desired business name is open, you should first run a business entity search to see if that name is already in use. You will officially assert your business name when you formally form your LP, but if you are not yet ready to do so, you may file a Name Reservation Request with the Georgia Secretary of State.
Filing the Certificate of Limited Partnership
Now, you can legally form your limited partnership.
Your new Georgia limited partnership will need to be registered with the Georgia Secretary of State using a document known as the “Certificate of Limited Partnership.”
You will need the following information to complete your Certificate of Limited Partnership:
- The exact name of the LP
- LP’s registered office and registered agent’s address (must be the same)
- Each general partner’s name and address
- Disclosure of any other relevant matters by the LP
- Each general partner’s signature
You may file your Certificate of Limited Partnership either online or by mail. If you choose to file by mail, remember that the State of Georgia does not have a fillable pdf form for you to use, but it does present this guide to starting your own Certificate of Limited Partnership.
What Benefits Does Georgia Give to an LP?
LPs doing business in Georgia can take advantage of several tax credits. Businesses that conduct research within the state can take advantage of a tax credit. A tax credit is also available to companies with their headquarters in Georgia.
In addition, Georgia is one of the few states that allow limited partners to participate in the management of their limited partnership without exposing their limited liability.
What Disadvantages Does Georgia Give to an LP?
The Georgia Secretary of State requires annual registration, which costs $50. If you fail to register on time, your business will automatically dissolve. If that happens, you will have to pay $250 to reinstate your LP.
Should I Hire a Lawyer?
Setting up any limited liability enterprise can be tricky, and it is important to set up your LP properly to get all the benefits of this business structure. Speaking to a Georgia corporate lawyer can be helpful to make sure you follow all the rules required by Georgia.
