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CREATING A VALID LIMITED PARTNERSHIP IN TEXAS By:Murray-Lobb, PLLC

5/30/2018

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Creating a Valid Limited Partnership in Texas
Few activities are as rewarding as setting up a new business when you’re ready to start selling your goods or services to the public. However, it’s important to understand the distinct benefits and drawbacks of the various business structures you can choose from. While some people prefer to run a sole proprietorship, others believe they’ll be better served by creating a partnership, limited liability company or corporation. If you’re uncertain which structure may work best for you, it’s important to meet with your Houston business law attorney for early guidance and advice.
This article focuses on the formation of a Texas limited partnership (LP) and how its structure and requirements are unique compared to those of a limited liability partnership (LLP).
How Can Specific Business Structures Affect You & Your Company?
The structure you choose directly bears on the taxes your partnership may have to pay, the paperwork that must be filed with the state before you can begin transacting business, how you can raise money to finance your activities, and your own personal liability for debts owed by the partnership.
How Do Texas Limited Partnerships and Limited Liability Partnerships Differ?
One of the main distinctions between an LP and an LLP is that a limited partnership has only one general partner whose liability is unlimited – and all the other partners have limited liability. As might be expected, the partners assigned limited liability only have limited control over how the company or business is run.
A limited partnership is required to operate in keeping with its oral or written partnership agreement. As is true regarding most business matters, it’s always best to capture any agreement this important in written form. Although you do not have to file a copy of the partnership agreement with the state of Texas, you do need to provide a “certificate of formation” to the Texas Secretary of State’s Office.
Some businesses prefer to limit the general partners’ liability by creating a limited liability partnership (LLP). Those forming this type of business structure must provide the Secretary of State’s Office with a properly completed registration form.
Additional Key Facts You Should Know When Forming a Limited Partnership (LP)
  • Each LP is governed by Texas Business Organizations Code (BOC) Title 4, Chapters 151, 153 and 154. Specific details governing the contents of the required certificate of formation are set forth in the BOC Title 1, Chapter 3, Subchapter A;
  • Every LP will have one or more general partners – as well as one or more limited partners.In addition to individual people, partners can also be corporations, partnerships and other types of legal entities;
  • Taxation. Keep in mind that limited partnerships are subject to paying a franchise tax. You can learn more about your partnership’s tax status by contacting the Tax Assistance Section of the Texas Comptroller of Public Accounts. (Be sure to research other possible federal government tax issues by visiting the Internal Revenue Service website at www.irs.gov);
  • In your certificate of formation, your LP must provide the Secretary of State’s Office with a fully unique name for your partnership that’s distinctly different from any other one currently in existence;
  • A registered agent (who has fully consented to serve in this role) and a registered office must be set forth in your certificate;
  • The name (and address) of each general partner must be provided in your certificate. Every general partner must sign the certificate of formation.
While this is not intended to be a comprehensive listing of every requirement for properly filing an LP’s certificate of formation, it should clearly indicate that you must provide highly accurate and detailed information. Once the Texas Secretary of State files your certificate, your LP should become legally recognized. However, since certain questions may be raised about the certificate’s contents, it’s always best to have a lawyer help you fill it out and then review it before it’s filed.
Lawyers in our office are always available to help you determine the best formal structure for your business – and to help you file all required paperwork with the Texas Secretary of State’s Office.

Posted in Business, Business Formation, Liability, Limited Liability Company, Murray Lobb, Texas Business, Texas Law
Tagged #businessformation, #businessstructures, #facts, #knowledgeispower, #limitedliability, #MurrayLobb, #murraylobbattorneys, #Texas, #texaslaw, Business
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