Do you want to form a limited partnership (LP) in Louisiana, 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 Louisiana.
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 Louisiana, 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 Louisiana state government, and there is also a formation fee involved.
Whereas the state of Louisiana 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:
Louisiana limited partnerships are legally required to include the words “Limited Partnership” or the allowable abbreviations “LP” or “L.P.” in the business name. 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 Louisiana, or you’ve officially formed your business.
Before reserving your limited partnership name, you must do a preliminary name search to check the name availability. This can be done using the state’s Commercial Database. After confirming the name is available, you may reserve it by filing a Reservation of Partnership Name for a processing fee of $25. After filing, the name will be reserved for a period of 120 days.
Every limited partnership in Louisiana 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 Louisiana Secretary of State,
All business registrations with the Secretary of State require, by law, an agent with a physical address in Louisiana. An agent, or as it is sometimes called, registered agent, can be almost anyone of legal age and a legal resident of Louisiana. An agent is someone that is designated to receive legal documents served on the business in the event of administrative or legal action. An agent has an obligation to forward the “legal documents” to the business.”
Without a registered agent in Louisiana, 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 establish a limited partnership in Louisiana you’ll need to complete and submit a Louisiana Partnership Registration form, which requires the following information:
To submit the formation document, you may either complete it as a PDF file and mail it to the Secretary of State, or file online using geauxBiz.
Cost to Form an LP: The state of Louisiana charges a filing fee of $100 to form a limited partnership.
Processing Time: While the Louisiana Secretary of State lists no guaranteed standard filing time, you may choose to expedite your document’s processing time for an additional fee. For 24-hour processing, there is a fee of $30. Two to three hour processing costs $50.
While not legally required by the state of Louisiana, 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 Louisiana, most limited partnership taxes are determined based on what goods or services your business offers as well as whether or not it has employees.
If your business sells taxable goods or services within Louisiana you’ll likely be required to pay sales tax. For businesses that have employees, some withholding tax is often necessary. Depending on the industry in which your general partnership operates, several other taxes such as excise tax, composite partnership tax, and school readiness tax may also be required.
To discover more information on your Louisiana tax liabilities, visit the Business Tax section of the Louisiana Department of Revenue website. To file online, register with the Louisiana File Online system.
Depending on where in Louisiana your business is located, you may also need to pay local taxes.
Large cities like New Orleans or Shreveport will likely have their own tax specifications. In order to ensure you’re meeting all local tax requirements, consult with the tax office of the city or county in which your limited partnership operates.
While Louisiana has no cover-all business license that will fully authorize your limited partnership to operate lawfully within the state, it does have many regulatory licenses that may or may not apply to your business.
Most state-level licenses are either regulatory or occupational in nature. If you’re a member of any of the specified professions, you’ll likely need an occupational license from a Louisiana agency. These can be researched through the Professional and Occupational Licenses section of the state government.
Depending on the nature of your business, you’ll likely need to obtain one (or several) regulatory licenses. All in all, establishing your state licensing requirements is made quite easy through Louisiana geauxBIZ website. Using the platform, you’ll be given the tools to create an individualized licensing checklist for your limited partnership.
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.
With few exceptions, limited partnerships operating in Louisiana that have any number of employees are required by the state to carry at least two types of insurance: workers’ compensation insurance and unemployment insurance. Information on both can be found through the Louisiana Workforce Commission website. 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.
Louisiana requires limited partnerships to file an annual report with the Secretary of State in order to remain in good standing with the state. The reports cost $30 to file and can be submitted conveniently online through geauxBiz.
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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