Do you want to form a limited partnership (LP) in Missouri, 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 Missouri.
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 Missouri, 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 Missouri state government, and there is also a formation fee involved.
Whereas the state of Missouri 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 limited partnerships in Missouri are required to establish names that either include the words “Limited Partnership” in the name or that contain the abbreviation “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 Missouri, or you’ve officially formed your business.
Before naming your limited partnership, you’ll need to confirm that the name you’re after is available for use. This may be done either by telephone or through the state’s search tool. Then, you’ll want to claim it by filing the Application for Reservation of Name. After receiving confirmation that the document was filed successfully, your limited partnership will hold exclusive rights to it.
Every limited partnership in Missouri 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 Missouri Secretary of State,
An agent may be either an individual who is a resident of Missouri and whose business office is identical with the entity’s registered office, or it may be a corporation authorized to transact business in Missouri and which has a business office identical with the entity’s registered office.”
Without a registered agent in Missouri, 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.
To establish your business with the Missouri Secretary of State, you’ll need to file a Certificate of Limited Partnership. Completion of the form requires the following information:
To fill out the Certificate of Limited Partnership, you may complete it as a PDF file here and submit it online or via mail.
Cost to Form an LP: The state of Missouri charges a filing fee of $105 to form a limited partnership.
Processing Time: The Missouri Secretary of State lists no standard processing time for the Certificate of Limited Partnership document.
While not legally required by the state of Missouri, 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.
State-level Missouri taxes will be levied largely depending on the nature of your business and which goods or services it provides. Thankfully, the Missouri Secretary of State makes determining your tax liability quite easy through the Missouri Online Business Registration.
In addition to business taxes owed to the state, limited partnerships with employees will also be required to pay employer taxes. More information on employer taxes and how to file them can be found when you register with the Missouri Uinteract System.
Depending on where in Missouri your business is located, you may also need to pay local taxes.
Some of cities in the state (such as Branson and St Louis) have their own local taxes. To discover any local tax liabilities that apply to your limited partnership, consult with the taxes section of your county or town website.
Missouri has no general state-level business license that can authorize your limited partnership to operate. However, depending on the nature of your business, you may be required to apply for several other industry-specific, professional, or regulatory licenses. In general, most of your state-level licensing requirements can be discovered by visiting the Register My Business page of the Missouri Business Portal.
Additionally, you’ll want to consult with either the county or the city in which your business operates to ensure you are meeting all local requirements. Cities such as St. Louis, Branson, and Springfield each have their own licenses and permits which may apply to 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.
If your Missouri limited partnership has five or more employees it is required by law to carry workers’ compensation insurance. Workers’ compensation insurance may be obtained either through an insurance carrier or through approval by the Division to insure yourself. In addition, employers are also required to pay unemployment insurance tax. Information on both of these insurance types can be found on either the Workers’ Compensation Insurance Section or the Unemployment Insurance Section of the Department of Labor & Industrial Relations 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.
Unlike some other states, there is no requirement in Missouri stating that limited partnerships within the state must file any type of annual report.
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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