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How to Form a Limited Partnership

Easy Steps to Forming a Limited Partnership for New Investors


Certificate of Limited Partnership

A certificate of limited partnership is often given to show an equity interest in a limited partnership instead of a traditional stock certificate. You can buy limited partnership kits from several online legal supply sites.

If you are interested in pooling your money with family members or other investors after reading about the benefits of limited partnership in Limited Partnerships 101, you may wonder how to actually get started, especially if you are interested in the estate tax and gift tax benefits. The good news is that a limited partnership can be formed with only a few hours of work if you have the right accountant and attorney.

The Two Main Ways to Form a Limited Partnership

There are several ways to form a limited partnership:

  • Go to a well-respected local attorney. They can help you file the paperwork, choose which state is most advantageous for you to domicile your limited partnership, and write an operating agreement. In addition, for a fee, many attorneys will act as the person of record so that official notices from the government will be received promptly.
  • Use a well-respected online legal provider such as LegalZoom, which sell pre-packaged limited partnership services that are priced according to your needs. These types of methods are often far less expensive than using a local attorney but more difficult to custom tailor to your needs. If a cookie-cutter limited partnership agreement will serve your purposes, this is the most cost-effective method and you can do virtually everything necessary online in under an hour.

An Important Consideration for New Limited Partnerships

One warning, though: Be very careful that you do not sell limited partnership interests to outside investors without first consulting with an attorney because these are often regarded as securities. There are strict rules and criminal laws that require compliance. It would be a disaster if you were to run afoul of them.

Now You're Ready to Get Into Business!

Once you have your certificate of limited partnership from the secretary of state where your entity is registered and a signed limited partnership agreement, you can open a bank account, brokerage account, acquire property, take out commercial loans, and more. You will be, for all intents and purposes, in business. That is, if you are going to create a start-up, such as a restaurant or retail shop, you can then get your business licenses, permits, and leases. If you are going to only buy and sell stocks and bonds, a brokerage account will suffice. If you are going to build real estate projects, you will be able to meet with contractors and sign documents as the general partner of the limited partnership.

More Information About Limited Partnerships

For more information, read the New Investor's Guide to Limited Partnerships.

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