Do you want to form a limited partnership (LP) in New Hampshire, 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 New Hampshire.
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 New Hampshire, 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 New Hampshire state government, and there is also a formation fee involved.
Whereas the state of New Hampshire 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:
As dictated by the state, New Hampshire limited partnerships are required to contain the words “limited partnership” or the abbreviation “L.P.” as the last word of the name. The name is not permitted to contain the name of any limited partners. For a full outline of Limited Partnership name restrictions and requirements, consult the “Name” section of New Hampshire’s Uniform Limited Partnership Act. 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 New Hampshire, or you’ve officially formed your business.
Before reserving a name with the state, you first have to check the name availability. To do so, you must search the business name on the New Hampshire Department of State website. When you’ve selected the name, you may reserve it by completing the Application for Reservation of Name and submitting it to the Corporations Division of the New Hampshire Department of State along with a $15 filing fee.
Every limited partnership in New Hampshire 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 New Hampshire Secretary of State,
a registered agent may be either a state resident or a corporation, LLC, or limited liability partnership that is authorized to transact business in the state. The agent must have a physical street address in New Hampshire; PO boxes do not suffice.”
Without a registered agent in New Hampshire, 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.
Establishing your limited partnership will require the filing of a Certificate of New Hampshire Limited Partnership. The form can be completed either online using NH Quickstart or downloaded here as a PDF and mailed to the Corporations Division of the New Hampshire Department of State. The document will require the following details:
Cost to Form an LP: The state of New Hampshire charges a filing fee of $100 to form a limited partnership.
Processing Time: The Department of State website includes no estimated or standard processing times. To enquire about how long the document will take to process, you may contact the Corporations Division of the New Hampshire Secretary of State.
While not legally required by the state of New Hampshire, 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 New Hampshire, businesses are not required to pay standard sales tax, use taxes, or employer withholding tax. There are, however, several other state taxes that may apply to your limited partnership.
A few of these include standard business taxes, which consist of the Business Enterprise Tax (BET) and Business Profit Tax (BPT). Other potential taxes include Communications Services Tax, Electricity Consumption Tax, and Interest and Dividends Tax.
For more information regarding the various New Hampshire state taxes and what businesses are obligated to pay them, you’ll want to check out the overview of New Hampshire taxes located on the Department of Revenue Administration website. When you have established your tax liabilities, you may file business taxes online by using New Hampshire’s e-file system.
Depending on where in New Hampshire your business is located, you may also need to pay local taxes.
Outside of state taxes, your New Hampshire limited partnership may also be subject to local taxes. If your business owns any real estate, it must pay a local property tax. In New Hampshire, property taxes are issued by the municipality in which your company’s property is located, and may be issued annually, semiannually, or quarterly. For more information on local property taxes, visit your municipality’s government website.
The state of New Hampshire does not have any general, state-level business license. However, the state does have other licensing and permit requirements which may apply to your limited partnership. These may include professional, occupational, environmental, health & safety, or other industry-specific licensing.
To determine whether you may be required to obtain an occupational license, you may want to take a look at this index of New Hampshire occupational licenses, certifications and registrations. For more information regarding state and local licensing and permits, consult the business section of New Hampshire’s official government website.
In some cases, local permits may be required in addition to state-issued licensing. To make sure your limited partnership meets these local requirements, reach out to your county clerk either through the local government’s website or by phone.
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 limited partnership has any number of employees working in the state, it will be required to obtain both unemployment insurance (UI) and workers’ compensation insurance. Unemployment insurance may be paid when you establish a UI tax account with New Hampshire’s Unemployment Insurance System. Alternatively, workers’ compensation insurance should be paid to the Workers’ Compensation Division of the New Hampshire Department of Labor. For more information on workers’ compensation insurance, check out this information guide on New Hampshire’s 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.
Conveniently, New Hampshire limited partnerships are not required to file any type of annual or biennial 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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