What is a Limited Partnership?
In a limited partnership, each partner is liable for debts only up to the amount of his or her investment in the company.
- Under Kansas Statutes a limited partnership must be formed in writing between one or more general partners and one or more limited partners.
- In addition, limited partners have no voice in the management of the partnership.
- Limited partnerships are ideal for property or for raising capital.
- Each limited partnership must have and maintain a registered office in Kansas that may or may not be the place of business.
- Additionally, a Kansas resident agent must be appointed, which may be an individual or a domestic or foreign business entity, such as a corporation, a limited partnership, a limited liability company, a business trust authorized to do business in this state, or the limited partnership itself.
- Registration with the Office of the Secretary of State is required.
- Interests in the limited partnership may be required to be registered with the Office of the Securities Commissioner.
- Investors have liability limited to their respective investments in the partnership.
- A limited partnership is a separate entity and may sue and be sued, own property, protect its limited partners from unlimited liability, raise capital by selling interests in the partnership, borrow money and exist independently of its partners’ mortality.
- The limited partnership does not have to be reformed every time a general partner or limited partner dies.
- It has the ability to borrow money, develop general partner savings, raise funds from operations, plus sell limited partner interests to generate capital.
- It is managed by the general partner and not subject to investor interference.
- Partners pay the tax because profits and losses pass through the entity to the partners.
In a Limited Partnership, each partner is responsible for filing a Kansas Individual Income Tax Return (Form K-40), the same requirement as a General Partnership. A Kansas Partnership Return or S Corporation Income Tax (Form K-120S) must also be filed. A Limited Partnership Certificate must be filed with the Secretary of State.
- The Partnership files an IRS Form 1065, but individual partners pay taxes on their share of profits shown on Schedule K-1 (Form 1120S) via Form 1040;
- The Partnership must obtain a Federal Employer Tax Identification Number (FEIN, Form SS-4);
- Partners may be subject to self-employment withholding, refer to IRS Publication 533.
- For an explanation of taxation and forms, refer to IRS Publication 541.
- A limited partnership requires advanced accounting procedures.
- It does not live in perpetuity, but lives for a stipulated period, usually for the life of the assets it owns.
- Limited partners have little voice in management once the investment is made in the partnership.
- Interests may not be freely traded. Therefore, a limited partner must hold the investment indefinitely.
- A Certificate of Limited Partnership and Annual Reports must be filed with the Office of the Secretary of State.
- Annual financial reporting must be made to limited partners.
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