Do you want to form a limited partnership (LP) in Wisconsin, 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 Wisconsin.
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 Wisconsin, 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 Wisconsin state government, and there is also a formation fee involved.
Whereas the state of Wisconsin 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:
Wisconsin limited partnership names are required to contain the words “limited partnership” or 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 Wisconsin, or you’ve officially formed your business.
Before reserving a name, it is recommended that you check the name availability. This can be done through the Wisconsin Department of Financial Institution’s “Search Business Records” service. Afterwards, you may claim the name by filing a Name Reservation Application.
Every limited partnership in Wisconsin 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 Wisconsin Secretary of State,
The registered agent is the person, resident in Wisconsin, designated by the corporation to receive official communications on its behalf, such as service of process, annual report forms, tax forms, etc. It may be an officer or employee of the corporation, or someone not directly involved, such as an attorney. It is important to keep the registered agent and registered office information current, as significant consequences could arise for failure to receive and act on important papers sent to the corporation’s registered agent. The physical address of the corporation’s registered agent’s business office is the corporation’s “registered office.””
Without a registered agent in Wisconsin, 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 with the state of Wisconsin will require the filing of a Certificate of Limited Partnership document. To complete the form, you’ll need the following information:
The Certificate of Limited Partnership can be obtained from and filed with the Wisconsin Department of Financial Institutions.
Cost to Form an LP: The state of Wisconsin charges a filing fee of $70 to form a limited partnership.
Processing Time: There is no listed standard processing time for the Certificate of Limited Partnership document. For inquiries regarding processing, you may consult the Wisconsin Department of Financial Institutions.
While not legally required by the state of Wisconsin, 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.
Which state-level taxes apply to your limited partnership is determined mostly by the nature of your business and what goods or services it provides.
Commonly, Wisconsin limited partnerships will be required to pay sales and use tax. Other potential tax obligations include resort tax, withholding tax, local exposition tax, and many others. To discover your limited partnership’s tax liability and file taxes through the state’s My Tax System, you’ll need to visit the Wisconsin Department of Revenue.
Additionally, if you have any employees then you will be required to report and pay employment taxes on a regular basis. Details on employment taxes, who they apply to, and how to pay them can be found on the Wisconsin Department of Workforce Development website.
Depending on where in Wisconsin your business is located, you may also need to pay local taxes.
Madison, the state’s capital, has a few of its own local tax requirements. Local tax may also exist in other countries and cities. To ensure your limited partnership is meeting all taxation requirements of its town or city, visit the taxes page of the municipality’s website.
Wisconsin has no cover-all business license that qualifies your business to operate lawfully in the state. There are, however, industry-specific regulatory licenses and occupational licenses you may need to obtain.
Regulatory licenses regarding the environment, health and safety are often issued either by the Department of Natural Resources or the Department of Health Services. Many of your business’s licensing needs can be determined through the state’s 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 limited partnership has employees then you’ll likely be required to pay for both unemployment insurance (UI) as well as workers’ compensation insurance. A full guide to UI, who it applies to, and how to obtain it can be found through the state’s Unemployment Insurance Handbook for Employers. Depending on several details regarding your business, you may also be required to pay workers compensation insurance. More information on workers’ compensation insurance can be found on the Workers’ Compensation For Employers page of the Department of Workforce Development 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, Wisconsin does not require limited partnerships to file any 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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