In order for an individual to have a better understanding of what limited partnerships are, it is helpful to know about partnerships in general. Partnerships are associations of two or more individuals who carry on as co-owners of a business for profit.
Partnerships, including limited partnerships, are formed when the parties involved with the business have the ability to share in the profits and if they have the right to control the business. The parties involved will then be called partners.
There are three different 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 the individual partners may face as part of their involvement in the partnership.
What Is a Limited Partnership (LP)?
Businesses can be formed in several different ways, such as:
Limited partnerships have at least one general partner and one limited partner. A general partner is the individual who is in charge of and who is wholly personally liable for the LP.
A limited partner, on the other hand, is not involved in controlling the LP. Therefore, a limited partner will not be held personally liable for anything that the limited partnership does.
The limited partnerships allows the limited partners to receive certain specific legal rights. These rights protect the partners for individual liability claims for certain reasons, including:
- Debt;
- Losses; or
- Violations directly related to the overall limited partnership.
With a general partnership, on the other hand, each partner may be held jointly and individually liable for the losses that are incurred by the partnership. This may, in certain situations, put the partners at a disadvantage, especially if that partner only plays a minor role in the partnership or if that partner has contributed less funds to the business than the other general partners.
Although it is referred to as a limited partnership, each LP requires that there is at least one general partner to be properly formed. A general partner will be responsible for making the management decisions for the limited partnership as well as its day to day operations.
Limited partners only have limited powers over a limited partnership. They can only be held liable to the extent of their investment in the LP.
Therefore, limited partners are mainly responsible for the investment duties relating to the limited partnership. In order to formally create an LP in West Virginia, it will have to be registered with the West Virginia Secretary of State.
What Are the Requirements for an LP?
In West Virginia, a company can only become an LP is they are not involved in:
- Banking;
- Brokerage; or
- Insurance.
In addition, there must be at least two partners in the limited partnership. One of these partners must be the general partner and there must be at least one limited partner.
The name of the company must include one of the following:
- Limited Partnership;
- Ltd. Partnership;
- L.P.; or
- LP.
In West Virginia, an LP is also required to have an office in the state to keep certain records, such as:
- The names of the partners;
- The certificate given by the state; and
- The names of the limited partners and how much each partner has financially contributed to the LP.
What Paperwork Do I Need to Form an LP?
West Virginia allows the LP’s paperwork to be completed online or it can be printed out and mailed to the Office of the West Virginia Secretary of State. An LP that is created for the first time in the state of West Virginia, also referred to as a domestic LP, is required to fill out a Certificate of Limited Partnership.
To complete this form, the LP will need to list:
- The name of the LP;
- The LP’s main office address;
- A mailing address for the LP if the mailing address is different;
- The address of a records office located in West Virginia;
- An email address;
- The name and address of an agent that can be served if the LP has an agent; and
- The names and addresses of the general partner or partners.
The owners of the LP will also be required to note if they have any other businesses in West Virginia as well as provide a brief description of the LP. All of the general managers of the LP will be required to sign the form.
The LP will also be able to include other information, such as if they are a veteran-run business. An LP that was first created in another state and is now seeking to transact business in West Virginia, called a foreign LP, is required to fill out a Statement of Limited Partnership – Foreign.
This form requires the same information as the form that is required for registering a domestic LP. However, the foreign form also requires the LP to provide:
- The new name of the LP if it plans to use a different name in West Virginia;
- The LP’s origination date; and
- A certificate of good standing for the LP from the original state.
What Benefits Does West Virginia Give to an LP?
Unlike many states, the State of West Virginia does not require a limited partnership to have a registered agent. This is one less issue a West Virginia LP is required to worry about.
If a veteran owns at least 51% of the limited partnership, the initial registration fee for both a domestic and a foreign LP is waived.
What Disadvantages Does West Virginia Give to an LP?
A limited partnership in West Virginia is required to file an annual report with the Secretary of State’s office every July 1st. The annual fee for LPs in West Virginia is $25.
An LP may have to pay more if it is late in filing the annual report. If the LP does not file the annual report on time, the LP may be dissolved.
What if I Have a Dispute that Involves a Limited Partnership?
As noted above, one of the main factors that separates the three types of partnerships is the amount of liability that may be attributed to each of the partners. This helps determine which of the partners can be held responsible for the financial losses of the partnership.
If, however, the limited partner was acting outside of the scope of their duties associated with their position, they may be held personally liable for any injuries or losses that resulted from their conduct. For example, if a limited partner attempts to present themselves as a general partner and makes management decisions or representations to that effect to a third party, then they may be held personally liable for their actions.
In contrast, if a limited partner was acting within the scope of their duties, which are typically outlined in the terms of an entity’s partnership agreement, it is more likely that the limited partnership itself will be responsible for any injuries or losses that result.
Should I Hire a Lawyer?
If you are interested in forming a limited partnership, have already begun the process, or even have already formed your LP, it may be in your best interests to consult with a West Virginia corporate lawyer. Your lawyer can help you fill out the required paperwork fully and satisfy all requirements for forming your LP.
If you have begun the process but have questions or concerns, your lawyer can help you avoid any mistakes that could place your company’s potential LP status at risk. Even if you have already formed an LP, your lawyer can help ensure you remain in compliance with West Virginia laws.
