A limited partnership (LP) is one of many different ways to organize or structure your business. Other business structures include LLCs, general partnerships, and corporations. With limited partnerships, there are two types of owners, known as partners. These two types are called general partners and limited partners. General partners are in charge of the LP, and, thus, can be held personally liable for any debts that the LP incurs.
Since limited partners are not involved in the company to the same extent that general partners are, the assets of limited partners are protected from liability for the LP up to the amount of money they contribute to the business. To form an LP in Virginia, you must meet certain requirements which are enforced by the Virginia State Corporation Commission.
What are the Formation Requirements for Virginia LPs?
In order to be a valid LP in the state Virginia, a company is required do complete number of items. One of these is deciding on and appointing a registered agent who can accept documents, such as legal notices and processes, on behalf of the company.
The registered agent may be a living person if they are one of the following:
- A general partner of the LP;
- An officer or director of a corporation that is a general LP partner;
- A general partner of another partnership that is also a general partner of the LP;
- The trustee of a trust that is a general partner of the LP; or
- A member of the Virginia State Bar who is engaged in the same type of business as the LP.
If the registered agent is not a living person, then it must be an entity such as a corporation, LLC, or LLP that is authorized to do business in Virginia. Furthermore, the entity must not be currently serving as its own registered agent, and it must provide a list of individuals who can be served at the registered agent’s office.
Another requirement that an LP must complete is to select a name that includes the words “Limited Partnership” or “a Limited Partnership,” or the abbreviation “L.P.” or “LP”. The LP must also have at least one general partner and one limited partner. Finally, an LP must file the required paperwork correctly with the Virginia State Corporation Commission.
What Paperwork Do I Need to Form a Virginia LP?
As of now, it is only possible to form an LP by filling out the appropriate paperwork and submitting the paperwork through the mail. A domestic LP is an LP that was created in Virginia. In order to establish or form a domestic LP, you will need to fill out a Certificate of Limited Partnership. Registering a foreign, or out-of-state, LP requires one to fill out and submit an Application for a Certificate of Registration to Transact Business in Virginia as a Foreign Limited Partnership.
The form for registering a domestic LP requires the names and addresses of the LP and the registered agent. All of the general partners will also need to include information such as their names, addresses, and signatures.
The form for registering foreign LPs requires you to provide the same information as the form for a domestic LP; however you will also need to provide the jurisdiction and date the LP was originally created, as well as any other names that the LP may be using or operating under elsewhere.
What Benefits Does Virginia Give to an LP?
Virginia does provide a number of benefits and incentives to companies, including LPs, wanting to do business in the state. These benefits primarily consist of tax incentives and grants. For instance, the Investment Partnership Grant (VIP) provides money in the form of grants to businesses whose services support manufacturing in the state.
Generally speaking, a main advantage of limited partnerships is that they will usually not result in a dissolution of the business if a limited partner withdraws their role from the company (or if they become incapacitated or deceased).
This differs from other forms of partnerships wherein the company dissolves if a partner withdraws from the company. Thus, LPs can sometimes allow changes to be made in the business without resulting in a full stop of the business operations.
What Disadvantages Do Virginia LPs Face?
Virginia requires LPs to pay annual registration fees of $50. Failing to pay this fee on time will result in your LP’s existence being automatically revoked. If your company continues to conduct business as an LP after automatic cancellation or prior to properly registering as an LP, then anyone involved in the company is guilty of a Class 1 misdemeanor and can face a punishment of a year in jail and a fine of $2,500.
Lastly, while the withdrawal of a limited partner will not result in a dissolution of the partnership, these types of circumstances can still result in legal issues or disputes. This is especially true if there are conflicts or issues arising from a partnership agreement or contract. In order to avoid such situations, it may be necessary to have a lawyer review any contracts or partnership agreements to determine how they might affect the company.
Do I Need to Hire a Business Lawyer When Forming an LP in Virginia?
If you would like to form an LP in Virginia, you should contact a Virginia corporate lawyer. When forming an LP there are forms and paperwork you must submit properly and in a timely fashion, so speaking with lawyer can make the process easier.
