Do you want to form a limited partnership (LP) in Florida, but you’re not familiar with the formation process?
A limited partnership can be a great alternative to a general partnership, but the LP is definitely more difficult to form compared to the more casual nature of the general partnership. In this guide, we’ll discuss all the crucial details of forming this business type in Florida.
There are several significant differences between the general partnership and the limited partnership (LP), starting with the roles of the partners themselves. With a general partnership, the partners split profits evenly and take equal responsibility when it comes to liability ― general partners are personally liable for the company’s debts and settlements.
With a limited partnership (not to be confused with the LLC), there is at least one general partner and one limited partner, which is the term for a partner that does not have managerial responsibilities, and their liability is limited to the amount of money they invested in the partnership.
Sometimes, you’ll hear limited partners referred to as “silent partners” due to their lack of direct involvement in the day-to-day operations of the company.
Another major difference is that the general partnership is not a formal business structure, which means you don’t even need to file formation documents with the state of Florida, or pay any sort of formation fee. The general partnership is simply formed when the partners begin transacting business together.
On the other hand, a limited partnership does have a formal formation process with the Florida state government, and there is also a formation fee involved.
Whereas the state of Florida allows general partnerships to operate under the individual names of the partners, that is not the case for limited partnerships, which must have a distinct business name.
Your limited partnership’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
All Florida limited partnerships must include one of the following phrases or abbreviations in their business name: “limited partnership,” “limited,” “Ltd.,” “L.P.,” or “LP.” In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Another aspect to consider is including language that explains what your business does ― for example, if you’re a realtor, put the phrase “real estate” in your LP name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your limited partnership’s name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LP is to not get too attached to any one business name until you have either reserved the name with the state of Florida, or you’ve officially formed your business.
In Florida, the process of securing your business name is rather simple. First, you should search the Florida Division of Corporations’ business name database to see whether your desired business name is available. If your business name is available for use, then you can claim it by officially registering your LP with the State of Florida. Unlike many other states, Florida does not allow you to reserve your business name in advance, so you should be prepared to form your LP when you complete this process.
Every limited partnership in Florida is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Florida Secretary of State,
A limited partnership shall designate and continuously maintain in this state: (a) A designated office, which need not be a place of its activity in this state. (b) A registered agent for service of process upon the limited partnership and a registered office, which shall be the address of its registered agent.”
Without a registered agent in Florida, you could lose your good standing and the state also has the right to dissolve your LP if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend designating a registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
At this point, it’s time to legally form your new limited partnership.
In order to officially form and register your LP with the State of Florida, you will submit a document called a “Certificate of Limited Partnership.” This important document includes:
In Florida, you may file your Certificate of Limited Partnership either online or by filling out and mailing this pdf.
Cost to Form an LP: The state of Florida charges a filing fee of $1,000 to form a limited partnership. If you require a certified copy of your Certificate of Limited Partnership or a Certificate of Status, then you may be subject to additional fees.
Processing Time: Your processing time will depend on how you file your Certificate of Limited Partnership. If you file online, then it will usually be processed in 2-3 business days, but if you file by mail, then it will often take 3-5 business days. Processing times are subject to increase during heavy filing season.
While not legally required by the state of Florida, a limited partnership agreement outlines some of the key operating principles of the business. Even though you don’t have to submit it to the state to form your LP, it’s still a vital document that describes the exact nature of the agreement between the general partners and limited partners.
The information included in a limited partnership agreement does vary depending on the nature of your business, the size of your company, and some other variables. In general, it’s good to get the following information down in writing:
Limited partnerships require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LP functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LP for free through the IRS.
Because LPs are considered “pass-through” entities by the State of Florida, all business income is passed to each partner, who will then claim that income on their individual tax returns. However, you will need to file a Partnership Information Return with the Florida Department of Revenue.
Although Florida LPs are exempt from Corporate Income Tax, your business may be required to pay other types of taxes. Businesses in certain industries, such as communications services, retail goods, or rental properties, may be subject to industry-specific taxes, and all LPs that hire employees will need to pay employer withholding tax.
If your LP may be subject to these kinds of business taxes, then you must file a Florida Business Tax Application, which will allow you to automatically register your business with the Florida Department of Revenue and enroll to pay all taxes that apply to your business. You may file this application by mail or online.
Depending on where in Florida your business is located, you may also need to pay local taxes.
Major cities such as Jacksonville, Miami, Tampa, and Orlando all have their own local requirements, so you should ensure that your business is also compliant with all local tax obligations.
The State of Florida does not requires all businesses to obtain a general business license to operate legally in the state.
However, just as your LP may need to pay business-specific taxes, your LP may need certain licenses or permits depending on your business activities. Florida issues a variety of different industry-specific licenses for various business activities, so you will likely need at least one to legally operate your business.
All LPs should therefore use the Florida Department of Business and Professional Regulation’s online search tool to determine whether they need to acquire certain types of business licenses to operate compliantly. This website also offers some guidance on obtaining local licenses and permits, but you should also check with your local government to see if your business requires any local licenses or permits.
If you would rather have a professional take care of your formation paperwork for you, you have a couple of options. The less expensive choice is to hire a business formation service to create your limited partnership.
While some service providers stick to less complicated business entities like limited liability companies, some also provide LP formations ― namely, LegalZoom and BizFilings. Currently ZenBusiness does not have this offering but does have regular LLC formation and business incorporation.
If you want the maximum possible degree of expertise, you should also consider hiring a business attorney to form your limited partnership. This is certainly a more expensive route, but if you want the peace of mind that every step is completed correctly ― and that all of your options have been thoroughly explored ― hiring a lawyer is a great option.
We highly recommend that you establish a business bank account so that your business and personal finances are maintained separately. This is important because it helps protect your personal assets, and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Florida LPs that hire employees are legally required to obtain two types of business insurance – workers’ compensation insurance and unemployment insurance. If you require further information on either of these types of insurance, you may consult the state Division of Workers’ Compensation and the Florida Department of Revenue. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Limited partnerships do not file business tax returns. Instead, the income is passed through the business entity to the partners, who then claim their share of profits or losses on their personal tax returns. Still, LPs do need to file an annual information return with the IRS, in which you report your business income, deductions, gains, and losses for the year.
All Florida limited partnerships must file an annual report with the Division of Corporations to maintain their active status. This simple report serves to update any important business information with the State of Florida. You must file this report electronically each year between January 1st and May 1st, and you will need to pay a $500 fee when you file.
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.
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