Form Limited Partnership Agreement Online with LegalZoom
A business entity where two or more partners operate and/or manage a business together is called a limited partnership (LP). The limited partnership agreement document specifies the two kinds of partners – general partners and limited partners.
General partners control the daily operation of the business and take on the legal and financial obligations of the company. Because they are legally liable and not protected through the limited business partnership agreement, general partners will usually form an LLC to protect themselves from liability.
Limited partners supply capital for the operation of the business, but are not involved in running the business. They are shielded from lawsuits and debts incurred by the company through the use of limited partnership agreements. This makes it very attractive for investors to become limited partners because their only liability is the money they invest in the company, and they do not have to deal with running the business.
Pros and Cons of a Limited Partnership Agreement
Like every formal legal structure, there are advantages and disadvantages to forming a partnership. Before you jump at the opportunity to sign even a simple partnership agreement, you should be aware of what you are getting yourself into. Of course, should you have any concerns, seek professional advice before signing on the dotted line.
Following are some of the pros related to forming a limited partnership (Wikipedia definition):
- Pass through taxation – The partnership itself is not responsible for taxes. Instead, the partners are taxed at a personal level (see an accountant for taxation details).
- Attract investors – Because there are two types of partners in a limited partnership contract – general and limited partners – it is easy to attract investors for a business venture. The investors are usually only interested in providing capital, while not becoming intimately involved in the day-to-day operations, which makes them a prime candidate to be the limited partner of a limited partner agreement. They can share in the profits of the business while being shielded from the liability the partnership could face.
- Structure – The general partners are responsible for the actual operation of the venture, with business partnership agreements acting as an outline of what each general partner’s responsibilities are. It is vital that a quality business partnership contract be used to avoid any operational questions/issues in the future.
- Replace investors with ease – Limited partners can come and go without the partnership agreement itself having to be dissolved. This allows a venture to attract new, or replace existing, investors with relative ease.
Following are some of the cons related to forming a limited partnership:
- Initial setup – The limited partnership agreement has to be initially setup and filed with the appropriate state agency. Each location may have differing requirements, which makes the use of an online legal documentation service, such as LegalZoom, a wise choice to easily navigate the government regulations to properly set up partnership contracts
- Liability – General partners can be held personally liable for debts and actions taken by the partnership. This is the primary reason why general partners will often create an LLC that functions as the general partner, offering the individuals the personal liability protection they need.
Real Estate Partnership Agreements
The limited business partnership agreement has become the tool of choice for those looking to get involved in an investment opportunity, especially those investing in real estate. A real estate partnership agreement can be an ideal tool for someone looking to get involved in real estate, especially if they are looking for outside investors, or are an outside investor themselves. Investigate if a real estate partnership is the right course of action for you if you are interested in becoming a landlord, or purchasing commercial real estate.
Form a Limited Business Partnership Agreement
LegalZoom is the leading online business formation service, and a great place to form a limited partnership agreement. Their easy, 3-step process makes forming your small business partnership agreement an easy and quick process. The table below compares the three partnership contract packages LegalZoom offers.
The first step has you filling out a simple online questionnaire which allows you to describe who the partners are, and any advanced provisions you want.
The second step has LegalZoom reviewing the information you provide for completeness and accuracy, and then they create a Certificate of Limited Partnership. If they are not able to sign this on your behalf, they must send it to you for a signature. Once signed, it is filed with the appropriate government agency.
Step three is the wrap-up of your order. Once LegalZoom receives the limited partnership paperwork back from the state, they send it to you with any other legal documents you requested them to process.
A limited partnership agreement is becoming more popular with business owners for the flexibility they offer. Form a limited partnership agreement today with LegalZoom, and let them do the hard work for you!