Limited Liability Partnerships
Forming an LP in Texas can be beneficial, but there are certain requirements to do so.
There are many ways to form a business in Texas, and a limited partnership, often called an LP, is just one of them. In this type of business, there are at least two owners of the business, and they are known as partners. Texas law permits these partners to be either limited partners or general partners. However, at least one partner must be a general partner.
With other partnerships, general partners are involved in all aspects of running the business. They are also liable for the actions of the business, both wholly and personally. Limited partners on the other hand, typically do not have anything to do with the daily operations of the company, and in return, they also have limited liability. In Texas, both limited and general partners have limited liability. However, their level of involvement in the business remains the same.
Requirements for Forming an LP
Before forming an LP, many requirements must be met. If the LP has not been registered in any other jurisdiction, such as out of the state, it must be formed as either a general partnership or a limited partnership. When a company has been formed outside of the state, it is considered to be a foreign LP. When registering a foreign LP in Texas, it is considered to already be an LP upon registering. Regardless of whether the company is a domestic or foreign LP, partners have to vote to register the company as an LP in Texas.
The naming requirements of an LP are fairly strict in Texas. The name must end in either the words, ‘limited partnership,’ or in the more commonly used abbreviation, ‘LP.’ All LPs in Texas must be registered with the Secretary of State with the appropriate paperwork.
Benefits and Drawbacks of Forming an LLP
Like with any other type of business structure, there are benefits and drawbacks to forming an LP in Texas.
The biggest benefit is that the profits an LP makes are taxed through each partner’s personal income tax. However, Texas does not collect personal income tax and so, partners do not have to worry about being taxed for the profits they received as part of forming the LP.
However, the drawback of LPs in Texas is that they are required to pay a franchise tax. This is based on the revenue of the LP.
Need Help Forming an LP? Call Our Texas Business Lawyers
So many business owners in Texas have already realized the benefits of forming an LP. If you need help with this type of business structure, or any other, call our Lake Jackson business lawyers today. At Cordoba Law Firm, PLLC, we will explain what you need to form an LP and guide you through the process, so it is as quick and easy as possible for you. Call us today at (979) 297-2854 or contact us online to learn how we can help with your business.