Limited partnerships in New York are a great option for individuals and companies looking to expand their business activities while minimizing risk of liability. A well-structured limited partnership can limit the liability of each partner to only their respective shares of capital and allow companies to access new capital sources, business opportunities, and potential for tax savings. Whether you are starting a new business venture or looking to expand an existing one, understanding and learning the steps of how to get started with a limited partnership in New York can provide the base for a successful business strategy.

What it Means to be a “Limited” Partner

In a limited partnership, limited partners are commonly referred to as those who only have a financial interest in the venture, with no active role in staffing or making operational decisions. These investors have limited liability, meaning they are not responsible for any debt or liabilities incurred by the enterprise. The limited partner's financial contribution is delineated in a partnership agreement and they only risk a capital contribution that they initially provide.

Benefits of a Limited Partnership

In addition to liability protection, limited partnerships can provide potential tax advantages for investors. Because partners of limited partnerships have a vested interest in the success of the enterprise, they are able to spread losses and deductions from businesses among themselves. Additionally, limited partnership agreements, as opposed to sole proprietorships and other forms of business, often provide for joint investment in assets and the use of multiple entities to control costs and manage assets. Furthermore, limited partnership agreements provide partners with control to decide how the business is operated and how its profits are distributed, uniquely catered to meet the best interests of the partners.

Who Makes Up a Limited Partnership?

When forming a limited partnership, there are two major roles: general partner and limited partner. The general partner has full control of the enterprise and is liable for all its debts and obligations. The limited partner has no control of the enterprise and is only liable for losses up to the amount the limited partner has contributed to the enterprise. Whether you or someone else takes one of those roles, you must both be legally identified and agree to the same terms in a partnership agreement.

Steps to Getting Started

When attempting to get a limited partnership started in New York, understanding the relevant law is a key step. Consulting with a qualified legal counsel or business attorney is essential in order to properly form the arrangement. The consulting lawyer or attorney can help the partners understand the scope of the proposed business, how to register it properly, and the technical aspects of putting together a limited partnership agreement. The agreement should specify the roles and contributions of each partner, structure of the enterprise, the percentage of each partner’s profits and losses, the rights of each partner should the other try to leave the partnership, and valid dispute resolutions. Once the parties have selected a qualified counsel, the counsel can help to draft the limited partnership agreement, ensure that it is properly registered with the Secretary of State, and finalize other filing requirements.

New York Specific Regulations

There are certain New York-specific regulations to consider when forming a limited partnership. For instance, members of limited partnerships must execute a certificate of limited partnership consisting of specific details such as the character of the business, the name of the limited partnership, generally approved post office address of the partnership's registered office in New York, and the names and addresses of each partner. Limited partnerships must also be registered with the Department of State and must annually pay a registration fee and send an annual statement.

Maintaining the Limited Partnership

Once the limited partnership has been properly formed, it is essential that each partner adheres to the rules formed in the limited partnership agreement. All members should actively participate or contribute in some capacity in order to keep the arrangement active and valid. Establishing clear roles and expectations for each partner can help ensure that operations run smoothly and avoid disputes.

Key point

Limited partnerships present a great way for companies to conduct activities with a level of limited risk. Due to the technical nature and involvement of other parties, it is essential to find a qualified counsel to form the limited partnership and ensure that all relevant steps and applicable regulations are taken. Understanding what it means to be a limited partner, the benefits that come with limited partnerships, the components of a limited partnership agreement, and key steps for getting started in New York is essential for forming a successful business venture.

Topics:

Limited Partnership,

New York,

Partnership Agreement