When clients proceed with forming a new Delaware company, clients sometimes contact Harvard Business Services, Inc. (HBS) to inquire about forming a new Delaware Limited Partnership. A Delaware LP is similar to an LLC in a sense that this is also a flexible entity type, however, the LLC continues to be the more popular entity type formed in Delaware. Here is a very helpful link that explains the differences between an LLC and LP in greater detail.
Clients often inquire about forming an LP for estate planning or for real estate ventures. LPs will include general partners and limited partners (while an LLC has members and managers). When clients inquire about forming an LP, they sometimes have questions about the definition of a limited partnership and the vocabulary associated with that particular entity. Below are the top LP terms that clients typically have questions about for a Delaware LP formation.
-Certificate of Limited Partnership – Similar to the Delaware Certificate of Formation for an LLC, the Delaware Certificate of Limited Partnership is the document that is filed with the Delaware Secretary of State for approval during the formation process. The difference between these documents is that the Certificate of Limited Partnership will typically include the name of the LP, the name and address of your Delaware-based Registered Agent and also, the name and mailing address of the General Partner(s). Delaware does not require the information of the limited partner(s) to be listed on the certificate.
-General Partners – Typically, the General Partners are responsible for all of the company's financial requirements and administration. General Partners usually possess the responsibilities of managing the company. They also hold general liability for any debts, obligations, and actions of the Limited Partnership. General Partners can be individuals and/or entities. It’s also important to note that the names and mailing addresses of the General Partners must be listed on the Certificate of Limited Partnership filed with the Delaware Division of Corporations.
-Limited Partners – The LP’s Limited Partners do not have the same responsibilities as the General Partners. Limited Partners do not manage the company, have no daily business responsibilities, and possess no liability for the company's debts, obligations or activities. Limited Partners are those that invest in the company, either in cash, services or other agreed upon valuable consideration. The Limited Partner information is not required to be listed on the Certificate of Limited Partnership filed with the state.
-Delaware LP Franchise Tax –The Delaware LP is required to pay an annual Delaware Franchise Tax and maintain a Delaware Registered Agent to remain active and compliant with the Delaware Division of Corporations. Similar to a Delaware LLC, the Delaware LP Franchise Tax is $300 and due on or before June 1st of each year.
-General Partner Change/Amendment Filing – Since the General Partner names and mailing addresses are listed on the Certificate of Limited Partnership filed with the state, clients sometimes ask what needs to be done if the General Partner changes within the LP. An Amendment to the Certificate of Limited Partnership can be filed for approval in Delaware to amend the General Partner information if needed. People often fail to update the General Partner Certificate information that was originally filed with the state.
There are many variables and questions to consider when deciding if forming a new Delaware LP is best for you. With a better definition of “limited partnership” and a firm understanding of the most commonly used LP terms, we can help you make that decision. We’re always happy to assist with any questions clients may have regarding this entity type and the overall formation process. (See disclaimer below)
If you plan on forming a new Delaware LP and obtaining an EIN, or if you have any questions regarding the formation process, we can be reached at 1-302-645-7400 or 1-800-345-2677 ext. 6900 or via email at firstname.lastname@example.org. We can also be reached via skype at delawareinc.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such sourceâ€™s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.