How to Form a Limited Partnership in Texas

How to Form a Limited Partnership in Texas

Forming a limited partnership (LP) in Texas involves several important steps to ensure compliance with state laws and regulations. A limited partnership is a business structure that includes at least one general partner and one limited partner. This structure can be advantageous for investors who wish to limit their liability.

Follow these steps to successfully form a limited partnership in Texas:

1. Choose a Name for Your Limited Partnership

First, you need to select a unique name for your limited partnership that complies with Texas rules. The name must include the term "Limited Partnership" or the abbreviation "LP." Additionally, ensure that the name is not already in use by checking the Texas Secretary of State's website.

2. Designate a Registered Agent

Every limited partnership in Texas must appoint a registered agent. This is an individual or business entity authorized to receive legal documents on behalf of the partnership. The registered agent must have a physical address in Texas.

3. File the Certificate of Limited Partnership

To officially establish your limited partnership, you must file a Certificate of Limited Partnership with the Texas Secretary of State. This document includes vital information, such as:

  • The name of the limited partnership
  • The registered agent's name and address
  • The name and address of the general partner
  • A statement of the duration of the partnership, if not perpetual

As of 2023, the filing fee for the Certificate of Limited Partnership is $750. It can be filed online or by mail.

4. Create a Limited Partnership Agreement

Although not required by law, it is highly recommended to draft a Limited Partnership Agreement. This document outlines the rights, responsibilities, and obligations of each partner. It can specify matters such as profit sharing, management structure, and procedures for adding or removing partners.

5. Obtain Necessary Permits and Licenses

Depending on your business activities, you may need to acquire additional permits or licenses to operate legally in Texas. Check with local and state authorities to ensure compliance with all applicable regulations.

6. Comply with Ongoing Filing Requirements

Once your limited partnership is formed, you will need to meet ongoing requirements to maintain your legal status. This includes filing an Annual Franchise Tax Report with the Texas Comptroller’s Office. Ensure you remain in good standing by fulfilling all obligations.

7. Open a Business Bank Account

It’s essential to separate your personal and business finances. Open a business bank account under the name of your limited partnership. This helps in maintaining liability protection and makes it easier to manage the business’s financial transactions.

8. Consult Professionals

Before and during the process of forming a limited partnership, consider consulting with attorneys or accountants who specialize in business formation. Their expertise can help you navigate legal requirements and tax implications more efficiently.

By following these steps, you can successfully form a limited partnership in Texas. Establishing an LP provides flexibility and liability protection, making it a suitable choice for various entrepreneurial endeavors.