A limited partnership (LP) consists of at least one general partner (GP) and one limited partner (LP).
A certificate must be filed with the Secretary of State to form an LP.
The GP manages and controls the business and is liable for the debts of the LP. In California, the LP may not manage the business without forfeiting its limited liability status.
Income that you receive as a GP or LP is taxed as an individual (no double taxation like a corporation).
See a CPA/tax consultant for the exact tax ramifications of starting your business as a Limited Partnership.
Liability of a Limited Partnerships
All GPs are jointly and severally liable for the debts of the partnership, whereas LPs are only liable for the assets they have contributed to the partnership.
- Fairly Easy to start
- File the required certificate with the Secretary of State.
- Low initial start-up costs
- Certificate filings, business licenses, and fictitious name statements are relatively inexpensive to file. Please see your local jurisdiction for actual costs.
- Unlimited GP Personal Liability
- All of a GPs personal assets are at risk if someone files a lawsuit against you or if you borrow money and creditors demand it. If you have insurance, it is possible that the insurance company may deny the claim or the claim may exceed your policy limits.
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