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

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Start a Limited Partnership in Connecticut

A limited partnership is an attractive business structure for those who want to start an LLC in Connecticut. 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 Connecticut, covering everything from researching and preparing to registering your limited partnership with the Connecticut government and beyond.

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

Steps in Starting a Limited Partnership in Connecticut

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 Connecticut. 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 Connecticut

To form a limited partnership in Connecticut, 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 Connecticut requirements, and ongoing management and compliance and reporting requirements. 

Step 1: Research and Preparation

Before starting a limited partnership in Connecticut, 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 Connecticut.

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 Connecticut 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 Resident 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 Connecticut, 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 Connecticut Business Name Search through the Connecticut Secretary of State Business Search to ensure the name you’ve chosen is available and not already used by another business.

Naming requirements for a Limited Partnership in Connecticut 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 Connecticut.

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 $60 and mail name reservation fee of $60. 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 one method, by mail, which costs around $10. In addition, the DBA’s validity in Connecticut is Indefinite, which you can file in Connecticut Secretary of State.

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

Hire a Resident Agent

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

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

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

You can serve as your own Resident Agent or appoint a friend or family member, or hire a professional Connecticut Resident 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 Connecticut.

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 Connecticut laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Connecticut 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 Connecticut government. This process typically involves filing a Certificate of Limited Partnership with the Connecticut 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 Connecticut Secretary of State. Include all necessary information and signatures, and pay the filing fee of $120.

Obtain an Employer Identification Number (EIN) from the IRS

After registering your limited partnership with the Connecticut government, you’ll need to obtain Connecticut 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 Connecticut Taxes

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

Step 5: Complying With Additional Connecticut Requirements

In addition to registering your limited partnership with the Connecticut 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 Connecticut 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 Connecticut Department of Business and Industry or a licensing professional to determine which licenses and permits apply to your limited partnership. However, in Connecticut, the costs of Connecticut 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 Connecticut.

File Annual Reports 

Connecticut require limited partnerships to file Annual Reports with the Connecticut 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 Connecticut 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 Connecticut

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

  • 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 Connecticut, 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 Connecticut?

Yes, a foreign Limited Partnership can do business in Connecticut by registering as a foreign LP with the Connecticut 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 Connecticut?

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 in Connecticut is a type of business structure where there are one or more general partners who have unlimited liability for the company’s debts, and one or more limited partners, who only have limited liability.
How do I start a limited partnership in Connecticut?
To start a limited partnership in Connecticut, you need to file a Certificate of Limited Partnership with the Connecticut Secretary of State and pay the appropriate fees.
What information do I need to include in the Certificate of Limited Partnership?
The Certificate of Limited Partnership must include the name and business address of the limited partnership, the name and business address of the agent for service of process, and the name and business address of each general partner.
How many general partners must a Connecticut limited partnership have?
A Connecticut limited partnership must have at least one general partner.
Can I be both a general partner and a limited partner in a Connecticut limited partnership?
Yes, you can be both a general partner and a limited partner in a Connecticut limited partnership.
Can a limited partnership be an S corporation in Connecticut?
No, a limited partnership cannot be an S corporation in Connecticut.
How is a Connecticut limited partnership taxed?
A Connecticut limited partnership is a pass-through entity for tax purposes, so it is not taxed at the entity level. Instead, each partner reports their share of the partnership’s income or loss on their individual tax returns.
Does Connecticut require a registered agent for a limited partnership?
Yes, Connecticut requires every limited partnership to have a registered agent for service of process.
Can the registered agent be a general partner in the Connecticut limited partnership?
Yes, the registered agent can be a general partner in the Connecticut limited partnership.
Do I need to publish notice of the limited partnership formation in Connecticut?
No, you do not need to publish notice of the limited partnership formation in Connecticut.
Can a limited partner in Connecticut manage the business?
No, a limited partner in Connecticut cannot manage the business. If they do, they risk losing their limited liability.
What is the liability of a limited partner in Connecticut?
The liability of a limited partner in Connecticut is limited to the amount of their investment in the limited partnership.
Can a limited partnership in Connecticut have employees?
Yes, a limited partnership in Connecticut can have employees.
Does Connecticut require a written partnership agreement for a limited partnership?
No, Connecticut does not require a written partnership agreement for a limited partnership. However, it is recommended to have one.
Can an out-of-state limited partership do business in Connecticut?
Yes, an out-of-state limited partnership can do business in Connecticut, but they must file a Foreign Limited Partnership Application with the Connecticut Secretary of State.
How long does it take to form a limited partnership in Connecticut?
It typically takes about two to three weeks to form a limited partnership in Connecticut.
What is the fee to form a limited partnership in Connecticut?
The fee to form a limited partnership in Connecticut is $125.
Do I need a business license to start a limited partnership in Connecticut?
It depends on the type of business your limited partnership will engage in. Some businesses require specific licenses and permits in Connecticut.
Does a Connecticut limited partnership have perpetual existence?
Yes, a Connecticut limited partnership has perpetual existence unless otherwise provided in the Certificate of Limited Partnership.
Can a Connecticut limited partnership have an express purpose?
Yes, a Connecticut limited partnership can have an express purpose.
Can a limited partner in Connecticut contribute services instead of money?
Yes, a limited partner in Connecticut can contribute services, but this will not be considered a capital contribution.
How do I dissolve a Connecticut limited partnership?
To dissolve a Connecticut limited partnership, you need to file a Certificate of Dissolution with the Connecticut Secretary of State.
Can a limited partnership convert to a different business structure in Connecticut?
Yes, a limited partnership in Connecticut can convert to a different business structure, such as a LLC or corporation.
Can I change the name of my Connecticut limited partnership?
Yes, you can change the name of your Connecticut limited partnership by filing an Amended Certificate of Limited Partnership with the Connecticut Secretary of State.
Can a foreign limited partnership do business in Connecticut?
Yes, a foreign limited partnership can do business in Connecticut, but they must file a Foreign Limited Partnership Application with the Connecticut Secretary of State.
Do I need consecutive numbering for my Connecticut limited partnership name?
Yes, your Connecticut limited partnership name must have consecutive numbering if another partnership has the same name.
Can a limited partnership in Connecticut have a single limited partner?
Yes, a limited partnership in Connecticut can have a single limited partner, but they cannot be the only general partner.
What happens if a general partner withdraws from a Connecticut limited partnership?
If a general partner withdraws from a Connecticut limited partnership, they are no longer a partner and lose their share in partnership profits and losses.
What is a limited partnership in Connecticut?
A limited partnership in Connecticut is a type of business arrangement where there are one or more general partners who manage the company and one or more limited partners who invest but have limited liability.
What do I need to do to form a limited partnership in Connecticut?
To form a limited partnership in Connecticut, you first need to file a Certificate of Limited Partnership with the Secretary of the State.
How many general partners can I have in a Connecticut limited partnership?
A Connecticut limited partnership must have at least one general partner but can have as many as desired.
Can a limited partnership in Connecticut have only one partner?
No, a Connecticut limited partnership must have at least two partners – one general partner and one limited partner.
What is the liability of a limited partner in a Connecticut limited partnership?
A limited partner in a Connecticut limited partnership has limited liability and is only liable for debts to the extent of their investment in the business.
Can a limited partner in a Connecticut limited partnership also be a general partner in another company?
Yes, a limited partner in a Connecticut limited partnership can also be a general partner in another company.
What is the process for registering as a foreign limited partnership in Connecticut?
To register as a foreign limited partnership in Connecticut, you must file an Application for Registration as a Foreign Limited Partnership with the Secretary of State.
Can a foreign limited partnership own property in Connecticut?
Yes, a foreign limited partnership can own property in Connecticut.
What taxes does a limited partnership in Connecticut need to pay?
A Connecticut limited partnership needs to pay state taxes on any profits the business makes.
How do I dissolve a limited partnership in Connecticut?
To dissolve a limited partnership in Connecticut, you need to file a Certificate of Cancellation with the Secretary of State.
Do I need a lawyer to form a limited partnership in Connecticut?
No, you do not need a lawyer to form a limited partnership in Connecticut, but it is recommended to get legal advice.
Is there a minimum investment required to be a limited partner in Connecticut?
No, there is no minimum investment required to be a limited partner in Connecticut.
Can I change the name of my Connecticut limited partnership after it’s been formed?
Yes, the name of a Connecticut limited partnership can be changed by filing a Certificate of Amendment with the Secretary of State.
What is the yearly reporting requirement for limited partnerships in Connecticut?
Limited partnerships in Connecticut are required to file an annual report with the Secretary of State each year to maintain their status in good standing.
How do I change the address of my Connecticut limited partnership?
You can change the address of your Connecticut limited partnership by filing a Certificate of Amendment with the Secretary of State.
Can I form a limited partnership in Connecticut if I am not a resident of the state?
Yes, you can form a limited partnership in Connecticut even if you are not a resident of the state.
What is the difference between a general partner and a limited partner in a Connecticut limited partnership?
A general partner in a Connecticut limited partnership has unlimited liability while a limited partner has limited liability and can only be liable for debts up to the amount they have invested in the business.
Are there any limits on the number of limited partners in a Connecticut limited partnership?
There is no limit on the number of limited partners in a Connecticut limited partnership.
Can a limited liability company be a partner in a Connecticut limited partnership?
Yes, a limited liability company can be a partner in a Connecticut limited partnership.
Who can register a limited partnership in Connecticut?
Anyone can register a limited partnership in Connecticut as long as they meet the requirements.
What is the difference between a limited partnership and a limited liability partnership in Connecticut?
A limited partnership in Connecticut has one or more general partners and at least one limited partner, while a limited liability partnership has partners with limited liability.
Do I need to file a tax return for my Connecticut limited partnership every year?
Yes, a Connecticut limited partnership must file a tax return each year.
Can a limited partnership in Connecticut have more than one general partner?
Yes, a Connecticut limited partnership can have more than one general partner.
Can a general partner also be a limited partner in a Connecticut limited partnership?
Yes, a general partner in a Connecticut limited partnership can also be a limited partner.
Are there any naming restrictions for a Connecticut limited partnership?
The name of a Connecticut limited partnership cannot be the same as or too similar to the name of an existing business entity.
How does a limited partnership in Connecticut distribute its profits and losses?
Profits and losses in a Connecticut limited partnership are distributed to the partners based on the terms of the partnership agreement.
Can a Connecticut limited partnership operate in other states?
Yes, a Connecticut limited partnership can operate in other states by registering as a foreign partnership in those states.
Can I buy a pre-existing limited partnership in Connecticut?
Yes, you can buy a pre-existing limited partnership in Connecticut.

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Conclusion

Starting a limited partnership in Connecticut 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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