Do you want to form a limited partnership (LP) in Georgia, 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 Georgia.
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 Georgia, 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 Georgia state government, and there is also a formation fee involved.
Whereas the state of Georgia 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 Georgia limited partnerships must include a designation that indicates the type of partnership that they are forming at the end of their business name. This can include the phrase “limited partnership” or the abbreviations “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 Georgia, or you’ve officially formed your business.
To determine whether your desired business name is available, you should first conduct a business entity search to see if that name is already in use. You will officially claim your business name when you formally create your LP, but if you are not yet ready to do so, then you may file a Name Reservation Request with the Georgia Secretary of State.
Every limited partnership in Georgia 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 Georgia Secretary of State,
The registered agent is the “mailbox” for the corporation. The registered agent is the person or entity located in this state designated by the entity to receive any service of process, documents, or other official communication on its behalf. The registered agent may or may not be an owner, shareholder or officer of the entity. Many entities use their attorney or a professional corporate service company for this service. The registered agent’s address must be a street address in Georgia, and the agent must be located at that address.”
Without a registered agent in Georgia, 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 form your new Georgia LP, you will need to file a document called the “Certificate of Limited Partnership.” This form allows you to officially create your LP and register it with the Georgia Secretary of State.
In order to complete your Certificate of Limited Partnership, you will need the following information:
You may file your Certificate of Limited Partnership either online or by mail. If you decide to file by mail, keep in mind that the State of Georgia does not have a fillable pdf form for you to use, but it does offer this guide to creating your own Certificate of Limited Partnership.
Cost to Form an LP: The state of Georgia charges a filing fee of $100 to form a limited partnership.
Processing Time: The Georgia Secretary of State normally takes around 5-7 business days to process each Certificate of Limited Partnership. However, processing times can extend up to 12 days during peak filing times.
While not legally required by the state of Georgia, 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.
In Georgia, limited partnerships are considered to be “pass-through” entities, so all partners will pay taxes on partnership income on their individual tax returns – not through a corporate tax or other tax specific to limited partnerships.
However, you may need to pay other types of business taxes depending on your LPs business activities. If you hire employees, you will need to pay withholding tax. You may also need to register for sales and use tax, and if your LP sells certain types of goods, such as alcohol or motor fuel, you may be subject to certain excise taxes, for instance.
To determine whether you may be liable for these business-specific taxes, you should register your business with the Georgia Tax Center. This helpful online tool will assist you in determining your exact tax obligations to the State of Georgia.
Depending on where in Georgia your business is located, you may also need to pay local taxes.
Most local governments in Georgia – including those in major cities like Atlanta, Augusta, Columbus, and Savannah – have their own business taxes and regulations, so you should ensure that you check with your city or county to see if you are additionally liable for any local taxes.
Although you may need to obtain a general business license from your city or county, Georgia does not require you to obtain a general business license on the state level.
You may, however, need to acquire licenses or permits that directly pertain to your business activities. Businesses in industries from general contracting to elder care typically need to obtain some kind of state-level license, so there’s a good chance that your business may require some type of state license or permit.
To ensure that you are fully compliant with all Georgia laws and regulations, we recommend that you take the time to look through the Georgia Secretary of State’s licensing webpage and search for any agencies that may relate to your business. You should also check with your city or county government to determine any local licensing or permitting requirements.
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.
If your Georgia limited partnership has employees, then you will need to obtain unemployment and workers’ compensation insurance as required by law. For workers’ compensation insurance, you should consult Georgia’s State Board of Workers’ Compensation, and for unemployment insurance, you can check out the Georgia Department of Labor. 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.
In order to maintain their good standing in Georgia, all limited partnerships must annually register with the Secretary of State’s office and pay a $50 fee. This annual registration is quite simple and primarily serves to allow you to update the state with any pertinent information about your business. You can find more information about Georgia annual reporting here.
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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