It is important to have a general knowledge of a partnership to have a better idea of what a limited partnership is and what it entails.
A partnership is an agreement between two or more people to run a business together to make a profit.
When the persons involved in a business have the opportunity to share in the earnings and have the authority to control the business, this type of arrangement is known as a partnership.
There are a few variations of partnerships, the most common of which are general partnerships, limited liability partnerships (often known as LLPs), and limited partnerships. How the partnership was established will have an impact on the level of personal risk that each partner assumes as a result of their association with the business.
What Exactly Is an LP?
A limited partnership, sometimes known as an LP, is a kind of business organization that shields a specific category of investors known as limited partners from liability.
Because they do not play a significant role in the daily operations of the LP, partners who fall into this category have a reduced level of legal responsibility if the business is sued or accumulates debt.
A general partner is the other category of a business associate. Because general partners control the day-to-day operations of the limited partnership (LP), they are personally accountable for any debts incurred by the LP.
A limited partnership (LP) in the state of Washington requires to be registered with the office of the Secretary of State before it can be considered legal.
Even though it is referred to as a limited partnership, every limited partnership must include at least one general partner to be regarded as lawfully formed. The limited partnership’s day-to-day activities, as well as the management decisions about those activities, will fall under the purview of the general partner.
A limited partner’s influence over the partnership is restricted, and they can only be held accountable for their own actions to the amount of their financial contribution to the limited partnership. As a result, most of the tasks associated with the limited partnership’s investments fall on their shoulders.
What Documentation Am I Required to Have Ready to Form an LP?
You can find LP forms online, and you can either email or mail them in to complete the process. You also have the choice to finish and submit the paperwork in an electronic format via the internet. You must use the appropriate form when registering a limited partnership (LP), as there are distinct forms for domestic and international LPs.
The Certificate of Limited Partnership is the document that must be filled out for a domestic limited partnership (LP). To finish a Certificate of Limited Partnership, you need to enter the names and addresses of the limited partnership (LP), the general partner (or partners), and the registered agent.
You must also choose when you would like the LP to start. In addition to this, you will need to obtain the signatures of the general partner who is acting as the agent, as well as all general partners.
The Foreign Limited Partnership Registration is the form that foreign limited partnerships must submit. When filling out this form, you will need to provide all of the information requested on the Certificate of Limited Partnership in addition to the requested information here.
You will also be required to specify the date that the LP was initially established, where it was initially formed, and whether or not the company will operate in Washington under a different name than it has used in other states.
You are going to need to submit a Certificate of Existence from the jurisdiction in which your LP was initially registered in addition to the Foreign Limited Partnership Registration.
What Advantages Does the State of Washington Provide to an LP?
There is no individual income tax in the state of Washington. Because the profits of a limited partnership (LP) are taxed as part of each partner’s individual income tax liability, the partners of an LP domiciled in Washington are exempt from paying any state taxes on the profits of the LP.
What Kinds of Drawbacks Does Washington Pose for an LP?
The state of Washington levies two different types of taxes on commercial enterprises: a Business & Occupation Tax and a Combined Excise Tax.
Depending on the sector in which the company operates within the state’s economy, the company will be required to pay either of these two taxes. In addition, each limited partnership in the state of Washington is required to submit an annual report and pay a filing fee of $60.
Can One Withdraw Their Money From a Limited Partnership If They Own Shares?
In contrast to a general partnership, a limited partnership allows partners to step down from their roles in the company without triggering the dissolution of the entity as a whole. This is simply one of the significant characteristics that set a limited partnership from a general partnership in the business world.
When a limited partner wishes to withdraw from a limited partnership, that partner will be obliged to notify the partnership and to file the proper documentation (i.e., documents linked with the withdrawal) with the State. In addition, must notify the State.
In contrast, the withdrawal of a partner from a general partnership will typically result in the dissolution (termination) of that partnership. In other words, the partnership will no longer exist. It is also possible for a general partnership to end if one of its members passes away or becomes unable to carry out their duties.
What Should I Do If I Am Engaged in a Legal Battle Involving a Limited Partnership?
One of the key distinctions that can be made between the three different types of partnerships is the level of responsibility that may be placed on each individual partner. This will assist in determining which of the partners ought to be held liable for the monetary losses that the partnership has incurred.
In most cases, limited partners’ exposure to liability is capped to the amount of money they contributed to the limited partnership in question.
However, suppose a partner acted outside their responsibilities as a limited partner. In that case, they may be held personally accountable for any injuries or losses that they caused. This is because their actions went against the terms of their partnership agreement.
For instance, a limited partner could be held personally liable for their actions if they try to pass themselves off as a general partner, begin participating in management decisions or represent themselves as such to a third party. If they do this, they open themselves up to the possibility of being sued.
It is more likely that the overall limited partnership will be responsible for any injuries or losses resulting if the limited partner acts within the scope of their duties, which are typically set forth by the terms of an entity’s partnership agreement.
On the other hand, if the limited partner acted outside of their duties, it is less likely that the overall limited partnership will be responsible for any injuries or losses resulting.
There are situations in which many participants in the partnership can be jointly liable for either the partnership itself or for the payment of damages that have been awarded to a plaintiff.
This will depend on the specific facts surrounding the case, the responsibility agreement made by a partner and their partnership organization, and the fact that the partner entered into the arrangement.
Should I Retain the Services of a Business Lawyer?
Establishing a limited partnership (LP) might be challenging, but consulting with a corporate attorney in Washington will simplify the process. An attorney can help you navigate the necessary paperwork and answer any questions that may crop up along the way.
In addition, if you need to change the kind of business management structure that your business is registered as or if you need assistance with dissolving your business, your lawyer will be able to assist you with completing these tasks as well. This is beneficial for both you and your partnership.
