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 West Virginia, 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 West Virginia state government, and there is also a formation fee involved.
Whereas the state of West Virginia 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 West Virginia, Limited Partnerships are required to end the name with the phrase “Limited Partnership” or an abbreviation such as “LP” or “L.P.” 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 West Virginia, or you’ve officially formed your business.
West Virginia makes the name reservation process easy through the Application for Name Reservation document. Before you can file the application, you must first confirm that the name you’ve selected is available. This can be done by calling the Corporations Division at (304) 558-8000. After checking the name’s availability, filing the application, and receiving confirmation of the reservation, you are guaranteed exclusive rights to the name for 120 days.
Every limited partnership in West Virginia 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 West Virginia Secretary of State,
A limited partnership may wish to maintain a person (agent) to whom notice of process may be mailed. If the agent changes, you must notify the Secretary of State of such change.”
Without a registered agent in West Virginia, 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 completion of the West Virginia Certificate of Limited Partnership document. To file the form, you’ll need the following information:
To file the form with the West Virginia Secretary of State, you may either complete it as a pdf file and submit it by mail, or you may complete the form online through the state’s One Stop Business Portal.
Cost to Form an LP: The state of West Virginia charges a filing fee of $100 to form a limited partnership.
Processing Time: The Certificate of Limited Partnership generally takes 5-10 business days to process, but you may choose to expedite your filing for an additional fee.
While not legally required by the state of West Virginia, 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.
Most state-level taxes which apply to limited partnerships in West Virginia are levied depending on what goods or services your business provides.
In most cases, you’ll be required to pay sales and use tax. Other common taxes include excise taxes, which may apply to those manufacturing certain types of goods.
When you form your business, you’ll discover many of your tax liabilities when you file to obtain a West Virginia business registration certificate from the State Tax Department. This can be done either online using the One Stop Business Portal or by filing the WV/BUS-APP form.
Depending on where in West Virginia your business is located, you may also need to pay local taxes.
For example, some municipalities charge a municipal sales tax on all sales made within their jurisdiction. In addition to these, you may need to meet other local taxation requirements. To check your city or towns taxation liabilities, visit the town clerk or local government webpage.
Depending on the nature of your business, you may need to get several professional, occupational, or regulatory licenses.
West Virginia regulatory licenses are mostly issued by the Department of Health and Human Services, the Department of Agriculture, the Department of Environment Protection, or the West Virginia Secretary of State. They mostly pertain to health and safety, the environment, and agriculture.
On top of these, you’ll need to confirm your limited partnership has all required occupational and professional licenses. More Details on these licenses and others can be researched through the WV One Stop Business Portal.
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 West Virginia limited partnership has employees, you’ll be required to obtain both workers’ compensation insurance as well as unemployment insurance. Information on both can be found through the Workers’ Compensation Website and the WorkForce West Virginia website respectively. 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.
Each West Virginia limited partnership is required to file an annual report with the Secretary of State. Documents are due by July 1 and require a $25 filing fee. Submission of the annual report can either be done through the state’s One Stop Business Portal or by mail using a pdf form.
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.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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