How to Start a Limited Partnership in Arkansas | A Step-by-Step Guide

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Start a Limited Partnership in Arkansas

A limited partnership is an attractive business structure for those who want to start an LLC in Arkansas. It combines the best of both worlds, offering limited liability protection for limited partners and the ability to manage the business for general partners actively. This article will outline the steps on How to Start a Limited Partnership in Arkansas, covering everything from researching and preparing to registering your limited partnership with the Arkansas government and beyond.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your Arkansas Limited Partnership, all the steps in this article must guide you.

Steps in Starting a Limited Partnership in Arkansas

What is a Limited Partnership?

A Limited Partnership (LP) is a business structure comprising two types of partners: general and limited. It is a legal entity distinct from its partners and combines certain features of partnerships and corporations.

General partners are responsible for the day-to-day management of the business, make decisions on behalf of the partnership, and have unlimited liability for the partnership’s debts and obligations. This means their assets can be seized to cover the partnership’s liabilities if necessary.

Limited partners, on the other hand, are passive investors who do not participate in business management. They provide capital to the partnership and receive a share of the profits in return. Their liability is limited to the amount they have invested in the partnership, meaning that their assets are generally not at risk for the partnership’s debts beyond their investment.

It is suggested that you speak with a legal professional before you begin setting up your limited partnership in Arkansas. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC rather than a limited partnership.

– WEBINARCARE EDITORIAL TEAM

Steps in Starting a Limited Partnership in Arkansas

To form a limited partnership in Arkansas, you must consider following the below guidelines that, include research and preparation, establishing the limited partnership structure, drafting the limited partnership agreement, registering the limited partnership, complying with additional Arkansas requirements, and ongoing management and compliance and reporting requirements. 

Step 1: Research and Preparation

Before starting a limited partnership in Arkansas, you must familiarize yourself with this business structure’s laws and regulations. In the United States, limited partnerships are primarily governed by the Uniform Limited Partnership Act (ULPA). However, each state has its laws and regulations, so it’s essential to know the specific rules that apply in Arkansas.

While researching, consider whether a limited partnership is the most suitable structure for your business needs. Limited partnerships are ideal for businesses with one or more passive investors who want to avoid taking on the business’s day-to-day responsibilities. Consider alternative structures like Arkansas Corporations if a limited partnership doesn’t seem right.

Step 2: Establishing The Limited Partnership Structure

Once you’ve determined that a limited partnership is the right choice for your business, the next step is to establish the structure of your partnership. This involves choosing a name, hiring a Registered Agent, and determining the roles of the partners.

Choose a Name for the Limited Partnership

The name you choose for your limited partnership is essential to your business identity. In Arkansas, there are specific requirements that your limited partnership name must meet, such as including the words “Limited Partnership” or the abbreviation “LP.” Before settling on a name, conduct Arkansas Business Name Search through the Arkansas Secretary of State Business Entity Search to ensure the name you’ve chosen is available and not already used by another business.

Naming requirements for a Limited Partnership in Arkansas may include:

  • The name must be unique and distinguishable from other business entities registered in the state.
  • The name must include the words “Limited Partnership,” “L.P.,” or “LP.”
  • Certain words and phrases may be restricted or require additional approval from Arkansas.

If the limited partnership name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $22.50 and mail name reservation fee of $25. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name. 

The DBA filing can be done by three methods, online, by mail, and in person filing., which costs around $22.50 for filing online, $25 for filing by mail or in-person. In addition, the DBA’s validity in Arkansas is Indefinite, which you can file in Arkansas Secretary of State.

You can check out how to file a DBA in Arkansas for clearer understanding.

Hire a Registered Agent

A Registered Agent is a person or entity responsible for receiving legal documents and official notices on behalf of your LP. In Arkansas, your Registered Agent must:

  • Be a resident of Arkansas or a business entity authorized to do business in the state
  • Have a physical address in Arkansas (P.O. boxes are not acceptable)

Choosing a reliable and responsible Registered Agent is essential, as failure to receive and respond to legal documents can seriously affect your business. 

You can serve as your own Registered Agent or appoint a friend or family member, or hire a professional Arkansas Registered Agent Services. With that, we reviewed some of the best-registered agent services and provided features as an add-on with their formation packages for you to check out.

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Determine the Roles of the Partners

A limited partnership consists of two types of partners: general and limited. General partners are responsible for the day-to-day management of the business and have unlimited liability for the partnership’s debts and obligations. Limited partners, on the other hand, are passive investors who don’t participate in the management of the business and have limited liability up to the amount they’ve invested in the partnership.

As you structure your partnership, carefully consider who will take on the roles of general and limited partners. Remember that general partners will have more responsibility and potential liability, so choose those individuals wisely.

Step 3: Drafting the Limited Partnership Agreement

With the partnership structure established, the next step is to draft a limited partnership agreement. This document sets forth the partnership’s terms and conditions and should be carefully crafted to ensure it meets all legal requirements in Arkansas.

Include Essential Elements

A well-drafted limited partnership agreement should include the following essential elements:

  •  Name of the limited partnership
  •  Purpose of the limited partnership
  •  Duration of the limited partnership
  •  Names and addresses of general and limited partners
  •  Capital contributions of each partner
  •  Allocation of profits and losses
  •  Management and decision-making structure
  •  Process for admitting new partners

Address Optional Elements

In addition to the essential elements, it’s a good idea to address the following optional elements in your limited partnership agreement:

  •   Transfer of partnership interests
  •   Withdrawal or removal of partners
  •   Dissolution and winding up the process

To ensure your limited partnership agreement is legally sound and compliant with Arkansas laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Arkansas with experience in limited partnerships.

Step 4: Registering the Limited Partnership

Once your limited partnership agreement is in place, the next step is to register your limited partnership with the Arkansas government. This process typically involves filing a Certificate of Limited Partnership with the Arkansas Secretary of State’s office.

Prepare and File the Certificate of Limited Partnership

To file the Certificate of Limited Partnership, complete the required forms, which can typically be found on the Arkansas Secretary of State. Include all necessary information and signatures, and pay the filing fee of $50.

Obtain an Employer Identification Number (EIN) from the IRS

After registering your limited partnership with the Arkansas government, you’ll need to obtain Arkansas Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is used to identify your partnership for tax purposes and is required for filing federal and state tax returns.

The application of an EIN can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN, you can benefit in several ways. It will give your LLP the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Register For Arkansas Taxes

Depending on your business activities and location, you may need to register for certain Arkansas taxes. Check with the Arkansas Department of Finance and Administration or a tax professional to determine which taxes apply to your limited partnership.

Step 5: Complying With Additional Arkansas Requirements

In addition to registering your limited partnership with the Arkansas government, there may be other requirements you need to meet to operate your business legally. These may include obtaining business licenses or permits, filing annual reports with the Arkansas Secretary of State, and maintaining proper records and documentation.

Obtain Any Necessary Business Licenses or Permits.

Depending on the nature of your business, you may need to obtain various licenses or permits from state or local authorities. Check with the Arkansas Department of Business and Industry or a licensing professional to determine which licenses and permits apply to your limited partnership. However, in Arkansas, the costs of Arkansas Business Licenses range from $50 – $300.

You can check out the United States Business License & Licensing Fee Resources for more information about the costs in Arkansas.

File Annual Reports 

Arkansas require limited partnerships to file Annual Reports with the Arkansas Secretary of State’s office. These reports typically include updated information about the partnership, such as the names and addresses of partners and any changes to the partnership agreement. 

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Maintain Proper Records and Documentation

As a limited partnership, it’s essential to maintain proper records and documentation, including copies of your limited partnership agreement, tax returns, financial statements, and any other relevant documents. These records should be kept in a safe and accessible location and may be required in the event of an audit or legal dispute.

Step 6: Ongoing Management and Compliance

Starting a limited partnership in Arkansas is the beginning. To ensure the ongoing success of your business, it’s crucial to stay on top of management and compliance tasks. It is better to have regular meetings with your partners to ensure everyone is on the same page regarding the direction and performance of your business. These meetings can also help identify and address issues or concerns before they become more significant problems.

As a limited partnership, you must file annual tax returns and pay any required taxes at the federal and state levels. Consult with a tax professional to ensure you comply with all tax laws and deadlines.

Advantages of Limited Partnerships in Arkansas

Here are some key advantages of forming a limited partnership in Arkansas:

  • Limited Liability for Limited Partners: One of the main benefits of a limited partnership is that limited partners enjoy limited liability protection. This means their assets are generally not at risk for the partnership’s debts and obligations beyond their investment in the partnership. This limited liability can be attractive for investors who want to participate in a business venture without taking on the same level of risk as general partners.
  • Pass-through Taxation: Limited partnerships are typically subject to pass-through taxation, meaning the partnership’s profits and losses flow to the partners’ individual tax returns. This structure avoids double taxation, as the partnership is generally not subject to federal income tax. Instead, each partner is responsible for paying taxes on their share of the partnership’s income at their individual tax rate.
  • Flexibility: A limited partnership allows for flexibility in the management structure. General partners have the authority to make decisions and manage the business, while limited partners can remain passive investors. This division of responsibilities and decision-making power can appeal to both parties. It allows general partners to maintain control over the business operations and limited partners to invest without being involved in day-to-day management.
  • Ease of Formation: A limited partnership is typically less complicated and expensive than a corporation. Limited partnerships generally require filing a Certificate of Limited Partnership with the state and creating a limited partnership agreement, which is less complex than the documentation required for a corporation.
  • Attracting Capital: Limited partnerships can attract capital from investors who want to participate in a business venture without taking on the responsibilities and risks of being a general partner. This structure can help businesses secure funding while allowing limited partners to benefit from the partnership’s profits.
  • Continuity of the Partnership: In Arkansas, limited partnerships can continue to exist even if one of the general partners dies, withdraws, or is replaced, as long as there is at least one remaining general partner. This continuity can provide stability and help ensure the ongoing success of the partnership.

Can a Foreign Limited Partnership Do Business in Arkansas?

Yes, a foreign Limited Partnership can do business in Arkansas by registering as a foreign LP with the Arkansas Secretary of State or appropriate state agency. The foreign LP must provide a certificate of good standing from its home state and pay any required registration fees.

What are the Tax Implications of Forming a Limited Partnership in Arkansas?

Limited Partnerships are generally considered pass-through entities for tax purposes, meaning that the profits and losses of the business are passed through to the individual partners, who report them on their personal income tax returns. However, specific tax implications may vary depending on the state and the nature of your business. It is recommended to consult with a tax professional to determine your specific tax obligations.

FAQs

What is a limited partnership?
A limited partnership is a type of business structure where there are at least two partners, consisting of one or more general partners and one or more limited partners.
How do I choose a name for my Arkansas limited partnership?
The name of your limited partnership must be distinguishable from the names of other businesses registered or reserved in Arkansas.
Do I need to file any paperwork to start a limited partnership in Arkansas?
Yes, you will need to file a certificate of limited partnership with the Arkansas Secretary of State.
Is there a fee to file my certificate of limited partnership in Arkansas?
Yes, there is a fee of $50 to file your certificate of limited partnership.
What information do I need in order to prepare my certificate of limited partnership?
You will need to include the name and address of each general and limited partner, the name of the partnership, and the name and address of the registered agent.
Do I need to obtain any licenses or permits to operate my limited partnership in Arkansas?
This depends on the type of business you plan to operate. You may need to obtain certain licenses or permits from state or local government agencies.
How long does it take to process my certificate of limited partnership in Arkansas?
Processing times vary, but normal processing time for filings received by mail is 7 to 10 business days.
Can I file my certificate of limited partnership online in Arkansas?
Yes, you can file your certificate of limited partnership online through the Arkansas Secretary of State’s website.
Do I need to publish a notice of my limited partnership in Arkansas?
No, Arkansas law does not require any notice to be published.
When does my Arkansas limited partnership become effective?
Your Arkansas limited partnership becomes effective as of the date and time your certificate of limited partnership is filed by the Arkansas Secretary of State.
Do I need to obtain an EIN for my Arkansas limited partnership?
Yes, you will need to obtain an employer identification number (EIN) from the IRS to identify your Arkansas limited partnership for tax purposes.
Who can serve as the registered agent for my limited partnership in Arkansas?
The registered agent must be a resident of Arkansas or a corporation authorized to do business in Arkansas.
Can I act as both a general partner and a limited partner in my Arkansas limited partnership?
Yes, you can act as both a general partner and a limited partner in your Arkansas limited partnership.
Can I change the name of my Arkansas limited partnership once it is formed?
Yes, you can file an amendment to your certificate of limited partnership to change the name of your Arkansas limited partnership.
Can I change the structure of my limited partnership once it is formed in Arkansas?
Yes, you can amend your certificate of limited partnership to change the structure of your limited partnership.
Does Arkansas offer any tax incentives for starting a limited partnership?
Arkansas does not offer any specific tax incentives for starting a limited partnership.
Are there any ongoing requirements for maintaining my Arkansas limited partnership?
Yes, you will need to file an annual report with the Arkansas Secretary of State and maintain certain records.
How do I dissolve my Arkansas limited partnership?
You can dissolve your Arkansas limited partnership by filing a statement of dissolution with the Arkansas Secretary of State.
What happens to my assets if my Arkansas limited partnership is dissolved?
Your assets will be redistributed according to the terms of your partnership agreement, or if there is no agreement, according to Arkansas law.
What liabilities am I responsible for in an Arkansas limited partnership?
Limited partners are not responsible for the debts or obligations of the partnership beyond their original investment, but general partners have unlimited personal liability for the debts and obligations of the partnership.
How do I amend my partnership agreement in Arkansas?
You can amend your partnership agreement by filing an amendment to your certificate of limited partnership.
Can I convert my Arkansas limited partnership into another business structure?
Yes, you can convert your Arkansas limited partnership into a different business structure by filing the appropriate paperwork and meeting certain requirements.
What is the difference between a general partner and a limited partner in Arkansas?
General partners have control over the management and operation of the partnership, while limited partners have a passive role in the partnership and are not directly involved in management.
What is the minimum number of partners required to form an Arkansas limited partnership?
Arkansas requires at least two partners to form a limited partnership.
Can I use my personal bank account to manage the finances of my Arkansas limited partnership?
No, you should open a separate bank account for your limited partnership to avoid confusion and ensure accurate record-keeping.
What are some benefits of forming a limited partnership in Arkansas?
Limited partnerships offer liability protection to the partners and can be a flexible way to manage a business with multiple owners.
Can a limited partnership in Arkansas be formed without a written partnership agreement?
Yes, an oral partnership agreement is also enforceable in Arkansas, but a written agreement is recommended.
Can a foreign limited partnership do business in Arkansas?
Yes, a foreign limited partnership can do business in Arkansas if it registers with the Arkansas Secretary of State and meets certain requirements.
What is a limited partnership in Arkansas?
A limited partnership in Arkansas is a type of business structure in which some partners have limited liability while others have unlimited liability.
How is a limited partnership in Arkansas formed?
To form a limited partnership in Arkansas, you must file a certificate of limited partnership with the Arkansas Secretary of State.
What is the filing fee for a certificate of limited partnership in Arkansas?
The filing fee for a certificate of limited partnership in Arkansas is $50.
How many partners are required to form a limited partnership in Arkansas?
A limited partnership in Arkansas requires at least one general partner and one limited partner.
Who can be a general partner of a limited partnership in Arkansas?
Anyone can be a general partner of a limited partnership in Arkansas, including individuals, corporations, and other partnerships.
Who can be a limited partner of a limited partnership in Arkansas?
Anyone can be a limited partner of a limited partnership in Arkansas, including individuals, corporations, and other partnerships.
What are the responsibilities of general partners in a limited partnership in Arkansas?
General partners in a limited partnership in Arkansas have unlimited liability and are responsible for managing the business.
What are the responsibilities of limited partners in a limited partnership in Arkansas?
Limited partners in a limited partnership in Arkansas have limited liability and are not responsible for managing the business.
Can a limited partner in a limited partnership in Arkansas participate in managing the business?
Yes, but if a limited partner in a limited partnership in Arkansas participates in managing the business, they may lose their limited liability.
How is income taxed in a limited partnership in Arkansas?
Income from a limited partnership in Arkansas is passed through to the partners and taxed at each partner’s individual tax rate.
What is the annual report filing fee for a limited partnership in Arkansas?
The annual report filing fee for a limited partnership in Arkansas is $150.
How often must a limited partnership in Arkansas file an annual report?
A limited partnership in Arkansas must file an annual report every year by May 1st.
What is the penalty for filing a late annual report for a limited partnership in Arkansas?
The penalty for filing a late annual report for a limited partnership in Arkansas is $25 per month.
Can a limited partnership in Arkansas change its name?
Yes, a limited partnership in Arkansas can change its name by filing an application for change of name with the Arkansas Secretary of State.
What is the fee for changing the name of a limited partnership in Arkansas?
The fee for changing the name of a limited partnership in Arkansas is $50.
Can a limited partnership in Arkansas have a DBA?
Yes, a limited partnership in Arkansas can have a DBA by filing an application for registration of a fictitious name with the Arkansas Secretary of State.
What is the fee for registering a fictitious name of a limited partnership in Arkansas?
The fee for registering a fictitious name of a limited partnership in Arkansas is $25.
What is the procedure to dissolve a limited partnership in Arkansas?
A limited partnership in Arkansas can dissolve by filing a certificate of cancellation with the Arkansas Secretary of State.
What is the filing fee for a certificate of cancellation of a limited partnership in Arkansas?
The filing fee for a certificate of cancellation of a limited partnership in Arkansas is $50.
What happens to assets in a limited partnership in Arkansas in case of dissolution?
In case of dissolution of a limited partnership in Arkansas, assets are distributed to the limited partners first and then to the general partners.
Can a limited partnership in Arkansas file for bankruptcy?
Yes, a limited partnership in Arkansas can file for bankruptcy if it meets the eligibility criteria.
What are the eligibility criteria for a limited partnership in Arkansas to file for bankruptcy?
The eligibility criteria for a limited partnership in Arkansas to file for bankruptcy are the same as those for any other business, including meeting the debt amount and financial distress standards.
Can a partner in a limited partnership in Arkansas sell their interest in the partnership to someone else?
Yes, a partner in a limited partnership in Arkansas can sell their interest in the partnership to someone else, subject to the terms of the partnership agreement.
Can a limited partnership in Arkansas merge with another business?
Yes, a limited partnership in Arkansas can merge with another business, subject to the terms of the partnership agreement.
Can a limited partnership in Arkansas convert into another type of business entity?
Yes, a limited partnership in Arkansas can convert into another type of business entity by following the procedures prescribed by the Arkansas Secretary of State.
Does Arkansas recognize out-of-state limited partnerships?
Yes, Arkansas recognizes out-of-state limited partnerships if they have complied with the laws of the state where they were formed.
Can a limited partnership in Arkansas have offices or operations in other states?
Yes, a limited partnership in Arkansas can have offices or operations in other states, subject to the laws of those states.
What is the difference between a limited partnership and a LLC in Arkansas?
A limited partnership in Arkansas is a type of business structure in which some partners have limited liability while others have unlimited liability, while a LLC provides limited liability to all members (owners) of the LLC.
Is a limited partnership in Arkansas a pass-through entity?
Yes, a limited partnership in Arkansas is a pass-through entity, meaning that income is passed through to the partners and taxed at the individual partner’s tax rate.
Can a limited partner in a limited partnership in Arkansas manage the business to retain limited liability?
Yes, a limited partner in a limited partnership in Arkansas can manage the business to retain limited liability, but must follow certain rules and limitations to do so.

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Conclusion

Starting a limited partnership in Arkansas can be a rewarding experience, providing you with the benefits of limited liability protection for passive investors and the opportunity to manage your business actively. By following the steps outlined in this article and staying on top of ongoing management and compliance tasks, you can establish a successful limited partnership and enjoy the benefits of this unique business structure.

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