According to business law, the term partnership refers to an association of two or more parties working together as co-owners of a for-profit business. It is formed when those parties to a business have the ability to share in the business’ profits, as well as the right to control the business. Those parties are then said to be partners.
Partnerships can be categorized as one of three partnerships. These are general partnerships, limited liability partnerships (“LLPs”), and limited partnerships. The type of partnership formed will determine the amount of legal liability that any one partner may face as part of the partnership.
A limited partnership enables its limited partners to receive certain legal rights, which act as a sort of protection against individual liability claims. Such protections against individual liability claims include reasons, such as debt, losses, or violations, that are directly related to the overall limited partnership.
Alternatively, under a general partnership, each partner is individually and jointly responsible for any losses associated with the partnership. Doing so could put the partners at a disadvantage, especially if they serve a minor role in the partnership as compared to their partners. Another example of this would be if they have contributed less funds to the business when compared to the other general partners.
Although it is referred to as a limited partnership, each limited partnership requires at least one general partner in order to be considered properly formed. This party designated as general partner will be responsible for making management decisions for the limited partnership, as well as its day to day operations.
As the name suggests, a limited partner has limited powers over the partnership. As such, they can only be held responsible to the extent of their investment in the limited partnership. What this means is that they are largely responsible for investment duties associated with the limited partnership.
What Are the Requirements For Forming a Limited Partnership in Nevada?
Most states only have one type of limited partnership. However, Nevada is unique in that it allows for two different kinds of LPs. One type, known as an 88 LP, is governed by Chapter 88 of the Nevada Revised Statutes (“NRS”). The other is referred to as an 87A LP and is governed by Chapter 87A of the NRS. Due to the fact that Chapter 88 is older than Chapter 87A, there are considerably stricter rules governing that type, as well as a stronger division between the roles of limited partners and general partners.
As the first step of the process, all limited partnerships must choose which body of law they wish to be governed by, because each law has its own filing requirements and specific form. Another difference between the two Chapters would be that Chapter 88 requires a dissolution date for your LP, while 87A allows for your limited partnership to exist forever. Regardless of the type of limited partnership, the partnership must register as such with the Nevada Secretary of State.
Both types of limited partnerships require that you select a business name which includes the words “Limited Partnership,” “L.P.”, or “LP.” Your limited partnership must also designate a registered agent who can be served on behalf of the limited partnership. Possibly most importantly, your Nevada LP must have a general partner, and a limited partner.
What Paperwork Do I Need In Order to Form a Limited Partnership in Nevada?
As previously mentioned, different forms must be filed for an 87A LP than an 88 LP. And, there are separate 87A and 88 forms for registering foreign LPs. Foreign limited partnerships were formed in another state or country. All of these forms, along with the Initial List of General Partners form, are to be mailed to the Nevada Secretary of State’s Office.
Both the forms and requirements for a domestic 87A LP and a domestic 88 LP are incredibly similar. Additionally, both types of domestic LPs must file a Certificate of Limited Partnership; however, it is important to fill out the Certificate specifically designated for the type of limited partnership that you desire for your business. Both forms will require you to list the names and addresses for the LP as well as the initial general partners. You will also be required to include the names, addresses, and signatures of both the organizer(s) of the LP, and the registered agent.
In order to obtain the Certificate of Limited Partnership for an 88 LP, you must also list a dissolution date for the limited partnership. Although you can also designate a dissolution date for an 87A LP, you may also choose to leave that blank. Doing so will indicate that the limited partnership has the option to continue on in perpetuity.
A foreign limited partnership would be required to file an Application for Registration of Foreign Limited Partnership for either an 88 LP or an 87A LP. This would depend on how the foreign limited partnership wishes to be governed, although the information required for both forms are the same. What this means is that you will not need to list a dissolution date for either type of foreign LP.
Generally speaking, for both kinds of foreign LPs, you must include the following paperwork:
- The names and addresses of the limited partnership, as well as its general partner(s);
- The name that the LP will be using while conducting business in the state of Nevada specifically;
- Both the date and location of the LP’s original formation;
- The signature of the general partner, who is filing the paperwork; and
- The name, address, and signature of the LP’s registered agent, who must be located in Nevada.
Because the requirements for forming an LP in Nevada can be considerably exhaustive, you may wish to work with an area attorney. A Nevada attorney can review all of the requirements in order to ensure a successful filing.
What Are the Benefits Nevada LPs Are Entitled To? What Are Some Disadvantages?
One of the most significant benefits of forming an LP in the state of Nevada is that there is no personal income tax in Nevada. What this means is that you will not be required to pay any taxes on profits for your LP. This is because the profits are only taxed once, as part of your personal income.
Additionally, limited members of 87A LPs are permitted under NRS Chapter 87A to manage the LP, without sacrificing the liability protections that they are entitled to as limited partners. However, it is important to remember that this is not granted to limited partners belonging to an 88 LP.
One disadvantage of registering in Nevada is that each year, an LP must file a list of all of its general partners, as well as a state business license application. Although both annual requirements can be met with a singular form, they do have separate filing fees. This fee to file the annual general partnership list is $150, while the fee to file the annually for a state business license is $200. What this means is that your limited partnership must pay $350 in fees each year, in addition to filing paperwork annually.
Additionally, if a limited partner terminates their relationship with the business, there may be various legal issues and disputes. Although the termination will not necessarily dissolve the partnership, it can present some unique challenges for the business. It may be necessary to revise or review the partnership agreement in order to determine how a termination might affect the business.
Should I Consult With an Attorney When Forming a Limited Partnership in Nevada?
If you wish to form either a domestic or foreign LP in Nevada, you should consult with an experienced and local Nevada corporate attorney. As each state has its own fees and requirements, it is important to consult with a local attorney who can help you understand what is required by Nevada law specifically.
Your attorney can guide you through the process, as well as help you determine which Chapter would best suit your business needs. Finally, an attorney can also represent you in court, as needed.
