Frequently Asked Questions About Limited Partnerships in Chicago
For businesses of all sorts, the choice of the right corporate structure can be a monumental decision3 min read
For businesses of all sorts, the choice of the right corporate structure can be a monumental decision. You’ll want to consider many different aspects, such as the protections of choice of law, the level of control you have over the entities, and tax implications. For many companies, a limited partnership is the logical choice. But with this type of legal entity, there are many FAQs to consider. Here are some of the most commonly asked questions about limited partnerships in Chicago.
What is a Limited Partnership?
A limited partnership is a type of legal entity that combines some of the features of a partnership and a corporation. Under its umbrella, there are two types of partners -- general partners and limited partners. General partners are usually defined as the administrators of the partnership and have extensive control over the operations. Limited partners are less involved in the management, but contribute financially to the business.
What Benefits Does a Limited Partnership Provide?
The first major benefit that a limited partnership offers is liability protection. The general partners are the only parties who assume liability in the case of an action being brought against the partnership. This means that limited partners can partake in the profit-making without the burden of responsibility for losses and debts. Additionally, limited partnerships enjoy better taxation options than limited liability companies, and become subject to double taxation – each partner’s profits are taxed rather than the partnership itself. Lastly, in terms of decision making, the terms of the partnership generally vest final authority with the general partners, thus allowing limited partners to remain out of the operations of the business.
What are the Requirements for Setting up a Limited Partnership?
The specific requirements you’ll need to set up a limited partnership vary from state to state, and in the case of Illinois, have recently been modified by the Uniform Limited Partnership Act. Generally speaking, the likely requirements for setting up a limited partnership in Chicago include: filing the appropriate articles of organization or certificate of limited partnership with the secretary of state; paying the necessary filing fees; providing the names and contact information of the general partners; expressing the purpose of the partnership; and establishing a primary place of business and mailing address. Additionally, you’ll also need to register with the government of Illinois for the purpose of collecting sales tax if the business will be engaging in sales.
How Do You Dissolve a Limited Partnership?
Dissolving a limited partnership depends greatly on the partnership agreement, or the “operating agreement” as it is sometimes called. However, procedures for dissolution are generally defined by the laws of the state in which the business is registered, and are always subject to the requirements of the partnership agreement. Additionally, the death or incapacity of any of the partners in a limited partnership can also trigger dissolution of the business.
What Regulations Come with Limited Partnerships in Chicago?
In Chicago, businesses of all kinds, including limited partnerships, are regulated by a myriad of local rules and regulations. Businesses must follow standards of conduct for both private interactions as well as public appearances. Businesses must also register with the state of Illinois for sales tax and abide by the state's sales tax requirements. Additionally, general partners in a limited partnership must remain aware of anti-discrimination and employment law regulations and adhere to best practices of getting full legal counsel when setting up or dissolving a business.