Overview
A Texas Limited Partnership (LP) is similar to a general partnership while still offering limited liability protection to some of the partners. In a Texas LP, at least one partner must be a general partner with unlimited liability, and at least one partner must be a limited partner whose liability is limited to the amount of his or her investment. Limited partners act as “silent partners” making a capital investment much like passive shareholders in a publicly traded corporation but having no involvement in the management decisions of the business.
 

A Texas LP allows for pass-through taxation, as its income is not taxed at the entity level. Limited partners can use losses to offset other passive income on their tax returns. General partners losses can be used to shelter other income up to the value of their investment in the partnership since their losses are not usually considered passive.
 

The LP organization is especially appealing to types of businesses where a single, limited-term project is the focus such as real estate or the film industry. LPs can also be used as a form of estate planning.

Advantages of a Limited Partnership 

• LPs allow for pass-through taxation

• Limited partners are not held personally responsible for the debts and liabilities of the business

• Provides additional sources of investment capital

• The general partner(s) have full control over all business decisions

• Partners have more flexibility in structuring the management with less formal requirements and annual paperwork

To create an LP the proper formation documents must be filed with the appropriate state agency and the necessary state filing fees paid.

Pricing
If you decide that a Texas Limited Partnership is the best option for your business, we will form your LP in Texas, faster than anyone else, without costly legal fees. We offer three cost-saving packages
 

FAQ's
 

What is a limited partnership (LP)? When is the limited partnership (LP) entity type most commonly used? How are limited partnerships (LPs) taxed? How many owners are required to form a limited partnership (LP)? What should I name my limited partnership (LP)? How do I get started?

What is a limited partnership (LP)?
A Texas limited partnership is similar to a general partnership, with the primary difference of offering limited liability protection to some of the partners. In a limited partnership, at least one partner must be a general partner with unlimited liability, and at least one partner must be a limited partner whose liability is typically limited to the amount of his or her investment. Limited partners act as “silent partners” making a capital investment much like passive shareholders in a publicly-traded corporation but having no involvement in the management decisions of the business.

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When is the limited partnership (LP) entity-type most commonly used?
The limited partnership structure is especially appealing to types of businesses where a single, limited-term project is the focus, such as real estate or the film industry. Limited partnerships can also be used as a form of estate planning in that parents can retain control of their business while transferring interest to their children.
 

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How are limited partnerships (LPs) taxed?
Limited partnerships allow for pass-through taxation, as its income is not taxed at the entity level; however, a tax return for the partnership must be completed. Any income or loss of the limited partnership as shown on the return is passed-through to the partners’ individual tax returns. The partners, must then report the income or loss on their individual tax returns and pay any necessary tax.
 

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How many owners are required to form a limited partnership (LP)?
A limited partnership must have two or more owners. At least one owner must be a general partner who has unlimited, personal liability, and at least one owner must be a limited partner who has limited liability but is prohibited from participating in the management of the business.
 

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What should I name my limited partnership (LP)?
Choose the name of your limited partnership carefully. It is very important that your name portray the image you want for your partnership. Legally, the name you select must not be "deceptively similar" to any existing company or must be "distinguishable on the record" of your state.
 

Additionally, Texas requires that the name you select show your business is a limited partnership, by including the words "Limited Partnership" or the abbreviation of "LP " .
 

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How do I get started setting up a limited partnership (LP)?
After you decide to form a limited partnership, a certificate of partnership must be filed with the state and initial fees must be paid. If you choose the Baba Law Firm to form your limited partnership, we will complete these administrative tasks quickly and effectively.
 

After your certificate of partnership is filed, your limited partnership should have an organizational meeting where an operating/partnership agreement is adopted, partnership certificates are distributed and other preliminary matters are completed.
 

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Entity Comparision
This table provides an at-a-glance reference to how the most common business entity types compare in a number of key characteristics.

 

Characteristics	Sole Proprietorship	General Partnership	Limited Partnership	Limited Liability Partnership
Formation	No state filing required.	Agreement between two or more parties. No state filing required.	State filing required.	State filing required. In CA & NY the use of LLP is limited to accountants & lawyers.
Duration of Existence	Dissolved if entity ceases doing business or upon death of the sole proprietor.	Dissolves upon death or withdrawal of a partner unless safeguards are specified in a partnership agreement.	Perpetual	Dependent on the requirements imposed by the state of formation.
Liability	Sole proprietor has unlimited liability.	Partners have unlimited liability.	At least one general partner has unlimited liability.	Partners are not typically responsible for the debts of the LLP.
Operational Requirements	Relatively few legal requirements.	Relatively few legal requirements.	Some formal requirements, but less formal than corporations.	DE, GA, PA, TX & VA require an LLP to carry insurance or an escrow account to cover liabilities.
Management	Sole proprietor has full control of management and operations.	Typically each partner has an equal voice, unless otherwise arranged.	Limited partners are excluded from management unless they serve on the board of directors.	All partners have the right to manage the business directly.
Taxation	Not a taxable entity. Sole proprietor pays all taxes.	Not a taxable entity. Each partner pays tax on his/her share of income & can deduct losses against other sources of income.	Files taxes as separate entity, must meet certain criteria to avoid being taxed as a corporation.	Files taxes as a separate entity, must meet certain criteria to avoid being taxed as a corporation.
Pass Through Income/Loss	Yes	Yes	Yes, if requirements are fulfilled.	Yes, if requirements are fulfilled.
Double Taxation	No	No	No	No
Cost of Creation	None	None	State filing fee required.	State filing fee required.
Raising Capital	Often difficult unless individual contributes funds.	Contributions can be made from partners and more partners can be added	Contributions can be made from partners and more partners can be added.	Contributions can be made from partners and more partners can be added.
Transferability of Interest	No	No	Yes, pending approval of other limited partners and the general partners.	Possible, dependent on operating agreement restrictions.