Do you want to form a limited partnership (LP) in Mississippi, 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 Mississippi.
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 Mississippi, 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 Mississippi state government, and there is also a formation fee involved.
Whereas the state of Mississippi 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:
In Mississippi, you are required to include the word “limited” in your limited partnership’s name or the abbreviation “ltd.” 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 Mississippi, or you’ve officially formed your business.
Thankfully, Mississippi makes reserving your business name quite easy through its Corporations Registered Filer. After registering with the system, you’ll want to complete the Reservation of Name document and pay the filing fee of $25 to reserve the rights to your limited partnership name.
Every limited partnership in Mississippi 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 Mississippi Secretary of State,
Any individual, corporation or LLC may act as registered agent for any Mississippi company provided the agent has a physical address in the state of Mississippi. Noncommercial registered agents will not be listed on the Secretary of State’s website. Companies seeking to utilize a noncommercial registered agent must obtain that agent’s permission prior to listing the agent on any forms filed with the Secretary of State.”
Without a registered agent in Mississippi, 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.
Doing so requires the filing of a document known as the Certificate of MS Limited Partnership (form F0016). To complete the form, you’ll need the following information:
The Certificate of MS Limited Partnership can be filed online through the Mississippi Business Services Division website.
Cost to Form an LP: The state of Mississippi charges a filing fee of $50 to form a limited partnership.
Processing Time: There is no listed processing time for the Certificate of MS Limited Partnership document.
While not legally required by the state of Mississippi, 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 Mississippi, most state-level limited partnership taxes are levied based on what goods or services your business provides. Most commonly, you will be required to pay sales and use tax on any goods sold within the state. Other taxes such as withholding tax, liquor tax, and other industry-specific taxes may also apply.
Although there are many taxes which may apply to your limited partnership, determining your exact tax liabilities is quite easy. All you have to do is create an account through the TAP Online Registration system. After registering your business, the TAP system will make you aware of all your state-level business tax requirements.
Depending on where in Mississippi your business is located, you may also need to pay local taxes.
To ensure you’re meeting all local tax requirements, consult with the tax page of your local government. For example, Jackson and Biloxi both have their own business taxes that may apply to your limited partnership.
Mississippi has no standard business license that fully authorizes your limited partnership to operate in the state. However, it’s possible you’ll need to acquire several other licenses or permits such as regulatory licenses, professional licenses, or location-related permits. For help determining which to obtain, it’s suggested that you consult the Business Section of the Missouri State website.
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 Mississippi limited partnership has any number of employees, there are a couple type of insurances you’ll be required to pay for. One of these is unemployment insurance, which can be obtained by establishing a UI tax account with the Mississippi Department of Employment Security. If you have five or more employees, you’ll also be required to carry workers’ compensation insurance. This insurance type can be obtained either on the voluntary market, by self-insuring individually, by self-insuring with a group, or by assigned risk coverage. More information on workers’ compensation insurance can be found by visiting the state’s Workers’ Compensation Commission. 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.
While LLCs and corporations within the state of Mississippi are required to file an annual report, limited partnerships have no such requirement.
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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