Do you want to form a limited partnership (LP) in Oregon, 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 Oregon.
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 Oregon, 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 Oregon state government, and there is also a formation fee involved.
Whereas the state of Oregon 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 Oregon, all limited partnerships are required to have the words “limited partnership” included in the business name with no abbreviation or alteration. 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 Oregon, or you’ve officially formed your business.
Before claiming your business name, you’ll be required to check its availability using the Oregon Business Registry. The Oregon Secretary of State requires that the name be “distinguishable on record” as described in its name availability guidelines.
After it is confirmed that your desired business name is not in use by another LP, LLC, corporation, or other entity, you may proceed to reserve it by downloading the Application for Reservation of Name form as a Microsoft Word file here and submitting it to the Oregon Department of Consumer and Business Services.
Every limited partnership in Oregon 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 Oregon Secretary of State,
A registered agent is an individual or a business entity located at a physical street address in Oregon, whose sole responsibility is to accept legal documents (service of process, lawsuits, liens, subpoenas, etc.) on behalf of the business. An entity cannot designate itself as its own registered agent.”
Without a registered agent in Oregon, 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 do so, you’ll need to complete and submit the Certificate of Limited Partnership Document to the Oregon Secretary of State. The form will require the following details:
The PDF version of the Oregon Certificate of Limited partnership as well as instructions for filing it can be found here on the Oregon Secretary of State website.
Cost to Form an LP: The state of Oregon charges a filing fee of $100 to form a limited partnership.
Processing Time: The Oregon Secretary of State lists no standard processing time.
While not legally required by the state of Oregon, 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.
Oregon draws many new businesses because of its relatively tax-friendly requirements. Unlike most states, it has no use or sales tax. It also does not tax limited partnerships on purchases, inventory, intangible property, or capital stock.
That being said, your limited partnership will still likely have some tax obligations. Depending on the nature of your LP and if it has employees, you may need to pay withholding taxes or other industry-specific taxes.
A full guide to business taxes can be found in Oregon’s Employers Guide. For additional help and instructions on filing, you’ll need to consult the Department of Revenue Business Page.
Depending on where in Oregon your business is located, you may also need to pay local taxes.
For example, some municipalities such as Portland have their own tax requirements. To ensure you’re meeting local tax requirements in addition to state requirements, you’ll need to consult your local government’s website.
Like many other states, Oregon does not have a single, all-containing general business license. However, those forming a limited partnership in the state will likely need to meet other licensing requirements depending on the business type.
For help determining which licenses apply to you, the state has created this searchable license directory with more than 1,100 licenses, permits and certifications.
For personalized assistance with determining your limited partnerships licensing needs, you may want to use the Business Information Center’s Business Wizard. Using your LP’s location and business activities, it helps you generate a list of necessary license requirements.
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, you’ll likely need both workers’ compensation insurance and unemployment insurance. While most Oregon businesses do carry group health insurance for their employees, it is not required by law. Workers’ compensation insurance is available through private insurance companies or the National Council on Compensation Insurance. To register for unemployment insurance, you’ll need to complete and send the Combined Employer’s Registration form to the Oregon Department of Revenue or register online through the Secretary of State for a Business Identification Number. 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.
All Oregon limited partnerships are required to file an annual report with the Secretary of State. To do so, you’ll need to complete the digital Annual Report located here. By clicking the “renew online” link, you will be able to quickly and easily renew your limited partnership online.
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.
Ready to Start Your LLC?