The Oklahoma Limited Partnership Act (OULPA) of 2010 is the law that governs Oklahoma limited partnerships in the state. In the State of Oklahoma, the requirements to form a limited partnership (LP) include:
- File a certificate of limited partnership: To form an Oklahoma Limited Partnership, the partners must file a document with the Secretary of State called the Oklahoma Certificate of Limited Partnership and pay a filing fee;
- Check the name of the limited partnership: An individual must also name the LP and be sure to check that the name of the LP is not used and unique from other business entities in Oklahoma;
- Registered agent: All Oklahoma limited partnerships are required to maintain a registered agent and registered office in the state. The registered agent may be:
- the domestic limited partnership itself;
- an individual resident of the state;
- a domestic corporation;
- a limited partnership;
- a limited liability company or a foreign corporation;
- a limited liability company; or
- a limited partnership that is authorized to transact business in the state;
- Partner requirement: Oklahoma law does not limit the number of partners but it does require that limited partnerships have at least one general partner and at least one limited partner. The general partner will have control of day to day activities; and
- File annual reports: Unlike some states, the State of Oklahoma requires all LPs to file annual reports.
What Is a Limited Partnership?
A limited partnership is a specific type of business partnership. In a limited partnership, there are general partners and limited partners.
The general partners have more responsibilities. These partners are usually in charge of the operation and management of the limited partnership.
Limited partners, on the other hand, have fewer rights and duties than general partners. They are still able to enjoy some of the benefits of the partnership.
Limited partnerships are only required to have one general partner. However, there may be more general partners.
In numerous situations, businesses will choose to form as limited partnerships because of the favorable tax benefits in addition to the limited liability that the partners can take advantage of. Generally, limited partners cannot be held liable for the losses that the business experiences.
The rights of limited partners act as protection against individual liability claims that are directly related to the overall partnership, such as:
- Debt;
- Losses; or
- Violations.
A limited partner will only have limited powers related to the partnership. Additionally, they may only be held liable to the extent of their investment in the limited partnership.
A limited partner is responsible mainly for the investment duties that are related to the limited partnership. This is in contrast to general partnerships, in which each of the partners are individually and jointly liable for the losses that the partnership incurs.
A general partnership can put a partner at a disadvantage. Especially if that partner only plays a minor partnership or if they contributed less funds to the business than the other general partners.
What Paperwork Do I Need to Form an LP?
In Oklahoma, to form a Limited Partnership, the partners are required to file a document called the Certificate of Limited Partnership with the Secretary of State and pay a filing fee. The certificate is required to provide the following information:
- Name of the LP;
- Address of office of LP;
- Address of the agents of LP; and
- Name and Address of each partner of the LP.
What Benefits Does Oklahoma Give to an LP?
There are numerous benefits of forming a limited partnership in Oklahoma, including:
- Limited liability: Limited partners who form a limited partnership and contribute funds only face limited liability. This means that if the partnership goes bankrupt, the limited partner would only be liable up to the amount of money that they contributed or invested to the partnership and nothing more;
- Tax benefits: The profits and losses in a limited partnership flow through the business to the partners. The partners are taxed on their personal income tax returns and share in the profits and losses; and
- Less paperwork: An LP has less paperwork than formation of a corporation.
What Disadvantages Does Oklahoma Give to an LP?
There are certain disadvantages to limited partnerships in Oklahoma. This includes the limited partners having less of a say in the business than the general partners.
If a limited partner becomes active in the LP, the general partners may view it as a risk. In addition, in contrast to the general partners in the business, the limited partners’ income is not considered for tax purposes, so they are typically required to pay self-employment tax.
What Is a Partnership Agreement?
A partnership agreement is a type of legal contract that outlines the duties and rights of the general partners and limited partners. A partnership agreement typically includes certain information, including, but not limited to:
- Information regarding each partner;
- The duties and responsibilities of the partners;
- The allocation of the profits and losses for the each of the partners;
- The scope of the activities and functions of the partnership;
- The mission statement and goals of the partnership;
- Restrictions on management and leadership;
- Instructions regarding dispute resolution; and
- Instructions governing terminating the partnership.
A partnership agreement may also contain a clause that outlines the procedures for resolving legal disputes. For example, the agreement may require that, if a dispute arises, it should be resolved by an alternative method of dispute resolution, for example, arbitration.
It is important to have a partnership agreement in writing. This is due to the fact that, if a lawsuit is filed, the court will likely refer to the written partnership agreement to help determine the outcome of the legal dispute.
A partnership agreement will also provide legal enforcement for the terms of the operation of the limited partnership.
Is it Possible to Withdraw From a Limited Partnership?
Unlike in a general partnership, partners in limited partnerships are allowed to withdraw from the business without causing an automatic dissolution. This is one important feature that distinguishes a limited partnership from a general partnership.
If a limited partner wishes to withdraw from the limited partnership, they have to notify the partnership in addition to filing the necessary paperwork or documents associated with the withdrawal, with the state where the partnership operates. The partners who remain in the limited partnership will also be required to buy out the withdrawing partner.
In contrast, if a partner withdraws from a general partnership, it typically results in the termination, or dissolution, of the partnership. A general partnership may also be dissolved if one of the partners becomes incapacitated or passes away.
What Are Some Limited Partnership Disputes?
Similar to other types of business structures, a limited partnership may experience different types of legal disputes, such as:
- Disputes between general and limited partners;
- Disputes over allocation of benefits;
- Internal disputes involving the direction and aims of the overall partnership; and
- Legal violations, such as:
- tax fraud;
- securities fraud; and
- other types of white-collar crime.
Another common dispute that arises in limited partnerships is terminations. Limited liability partnerships are less prone to dissolution than other types of partnerships due to the fact that limited partnerships do not automatically terminate if one of the partners withdraws, as discussed above.
Should I Hire a Lawyer?
If you are considering forming a limited partnership and are involved in a limited partnership in Oklahoma, it is important to consult with an Oklahoma corporate lawyer. The laws that govern limited partnerships can be complex and having an attorney’s assistance can help ensure that the business complies with all of the laws and requirements.
Your lawyer can assist with many tasks related to the partnership, such as filing, creating documents, and negotiating the partnership agreement. If a dispute arises related to the partnership, your lawyer can represent you in court.
