Partnerships are associations of two or more individuals who carry on as co-owners of a business for profit. Partnerships are formed when the parties to the business have the ability to share in the business profits as well as a right to control the business.
There are 3 main categories of partnerships, including:
- General partnerships;
- Limited liability partnerships (LLPs); and
- Limited partnerships (LPs).
The type of partnership that is formed will determine the amount of liability that each individual partner may face as part of the partnership.
What is a Limited Partnership?
There are numerous different ways to form a business, for example, a sole proprietorship, an LLC, or a limited partnership (LP). One of the main benefits of an LP is that it limits the personal liability of each limited partner in the event that the LP incurs debt or is sued.
A limited partnership is a specific form of business partnership that enables the limited partners to receive certain legal rights. These rights provide protections against individual liability claims for reasons including losses, debt, or violations that are directly related to the overall limited partnership.
In a general partnership, in contrast, each of the partners is individually and jointly responsible for the losses that are incurred by the partnership. This may, in some situations, put the partners at a disadvantage, especially if the partner only plays a minor role in the partnership or if they have contributed less funds to the business than the other partners.
Although it is referred to as a limited partnership, every limited partnership requires at least one general partner to be considered properly formed. The general partner is responsible for making management decisions for the limited partnership as well as its day-to-day operations.
Limited partners only have limited powers over the partnership. In addition, a limited partner may only be held responsible to the extent of their investment in the limited partnership.
Therefore, the limited partner is mainly responsible for investment duties relating to the limited partnership. An individual can register their business as an LP with the Mississippi Business Services Division.
What are the Requirements for an LP in Mississippi?
One of the main requirements for an LP in Mississippi is that it has at least 2 partners in the business. The partners must be divided into 2 categories, general and limited.
The individuals involved will have to decide which partners fall into which category. Another decision that an individual will be required to make is who will serve as the registered agent for the LP.
This agent must be a local individual or company who can receive documents and be served on behalf of the company. The last major requirement is filing a Certificate of Limited Partnership.
What Paperwork Do I Need to Form an LP in Mississippi?
The paperwork that an individual needs to file will depend on whether they are filing as a domestic LP or as a foreign LP. A domestic LP in Mississippi is one that has been created in the state.
A foreign LP is one that was created somewhere other than in Mississippi. An individual can file the paperwork for either type of LP online at the Mississippi Business Services Division website.
To register an LP as a domestic LP, an individual must file a Certificate of Limited Partnership. With the online system, the individual will have to register online first.
Once they have elected to file a Certificate of Limited Partnership, they will be asked to fill out some basic information about the LP, such as the LP’s name, address, and email address. The individual will also be required to provide the mailing addresses and names of all of the general partners of the LP.
If an individual has already formed an LP but they are looking to do business in Mississippi, they will need to file an Application for Registration of Foreign Limited Partnership. Otherwise, their LP will be prohibited from suing anyone in Mississippi courts.
What Benefits Does Mississippi Give to an LP?
Mississippi does not require an LP to file an annual report or to pay an annual fee or tax. This is an advantage over other states which require LPs to file annual reports and pay annual fees.
What Disadvantages Does Mississippi Give to an LP?
Pursuant to Mississippi laws, LPs are obligated to permit any general partner who believes they are a limited partner to enjoy the limited liability of a limited partner, despite the fact that they are supposed to be a general partner. This may result in other general partners experiencing an increase in their personal liability.
General partners are also required to pay a self-employment tax that limited partners do not have to pay.
Is it Possible to Withdraw from a Limited Partnership?
Unlike general partnerships, partners in a limited partnership may withdraw from the business without subjecting the business to an automatic dissolution. This is just one of the important features that distinguishes limited partnerships from general partnerships.
When a limited partner withdraws from a limited partnership, they will be required to notify the partnership as well as to file the necessary paperwork, or the documents associated with the withdrawal, with the State. In addition, the rest of the partners to the limited partnership will have to buy out the partner who is withdrawing.
In contrast, when a partner withdraws from general partnerships, it typically results in the dissolution, or termination, of that partnership. General partnerships can also dissolve when any of the partners become either deceased or incapacitated.
What if I have a Dispute that Involves a Limited Partnership?
As previously noted, one of the primary factors separating the types of partnerships is the amount of liability that can be attributed to each partner. Typically, a limited partner is only liable to the extent of the investment they made in the limited partnership.
However, if a partner was acting outside the scope of their duties as a limited partner, they may be held personally liable for any injuries or losses that they caused. For example, if a limited partner attempts to hold themselves out as a general partner and makes management decisions or represents as much to a third party, then they may be held personally liable for their conduct.
If the limited partner was acting within the scope of their duties, which are typically set forth in the partnership agreement, it is more likely that the overall limited partnership will be responsible for any injuries or losses that result.
In certain cases, multiple partners to a partnership may be jointly liable either to the partnership or held responsible for paying damages awarded to a plaintiff. This will depend on the facts surrounding the case as well as the liability agreement that was created between and entered into by a partner and their partnership organization.
Should I Hire a Business Lawyer?
If you have any issues, questions, or concerns related to forming a limited partnership in Mississippi, it may be helpful to consult a Mississippi corporate lawyer to make the process a lot smoother. Your attorney will be able to assist you with any related legal tasks, including drafting the proper documents, negotiating partnership agreements, and assessing what rights and duties you have as a limited partner.
In addition, if you have to either file or defend against a legal claim against the limited partnership in court, your attorney can provide representation on the matter and can help guide you through the process more efficiently.
