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What are the terms of a limited partnership in Texas?

On Behalf of | Nov 7, 2022 | Business Formation And Planning, Partnership/Company Agreements And Disputes |

A limited partnership (“LP”) in Texas is comprised of general partners and limited partners. Limited partners do not have personal responsibility for the business’s debts and legal activities (unless they sign a personal guaranty). They also have less control than the general partners.

File with the state

To set up an LP, you need to submit a Certificate of Formation-Limited Partnership to the Texas Secretary of State. The form costs $750 to file, so you want to make sure the Certificate contains accurate information.

Choose an available business name

As long as your business name is unique in Texas, it generally will be accepted by the Secretary of State. However, you should check on a nationwide basis to make sure the name is not trademarked or being used elsewhere. You cannot use a name that suggests or implies that your business is part of a government agency. Also, you cannot include terms like “LLC” or “Inc.” in your company name, because these are for limited liability companies and corporations.

Obtain an EIN

You need an EIN (employer identification number) if your limited partnership will have employees. An EIN is a unique number that IRS assigns you for filing taxes.

Write an LP agreement

Texas law doesn’t require limited partnership agreements, but this document protects you from internal disputes. People sometimes go back on their word, so you might want to get all of your agreements in a formal written agreement. Check that your LP agreement is valid under Texas law as well. Courts cannot enforce any clauses that violate state law.

Appoint a registered agent

Limited partnerships must have a registered agent on file with the Secretary of State. You could appoint a partner, a professional or another individual, as long as they are a Texas resident. Registered agents accept legal correspondence for your business.

File Texas franchise tax

If your business needs to pay franchise tax, then you need to file a Texas franchise tax form every year. This is mandatory even when you do not owe tax.

File Public Information Report

Another requirement of LPs in Texas is filing a Public Information Report. You need to submit this document every four years.

Before setting up a limited partnership, you should know what tasks you need to complete. This helps you make a more informed decision on your business structure.