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

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Start a Limited Partnership in Delaware

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

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

Steps in Starting a Limited Partnership in Delaware

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 Delaware. 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 Delaware

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

Step 1: Research and Preparation

Before starting a limited partnership in Delaware, 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 Delaware.

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 Delaware 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 Delaware, 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 Delaware Business Name Search through the Delaware Division of Corporations 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 Delaware 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 Delaware.

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 Not available and mail name reservation fee of $75. 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 two methods, by mail and in person, which costs around $25. In addition, the DBA’s validity in Delaware is Indefinite, which you can file in Delaware Secretary of State.

You can check out how to file a DBA in Delaware 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 Delaware, your Registered Agent must:

  • Be a resident of Delaware or a business entity authorized to do business in the state
  • Have a physical address in Delaware (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 Delaware 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 Delaware.

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 Delaware laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Delaware 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 Delaware government. This process typically involves filing a Certificate of Limited Partnership with the Delaware 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 Delaware Secretary of State. Include all necessary information and signatures, and pay the filing fee of $200.

Obtain an Employer Identification Number (EIN) from the IRS

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

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

Step 5: Complying With Additional Delaware Requirements

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

File Annual Reports 

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

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

  • 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 Delaware, 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 Delaware?

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

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 in Delaware?
A limited partnership in Delaware is a type of business entity that is made up of one or more general partners and one or more limited partners.
How do I form a limited partnership in Delaware?
To form a limited partnership in Delaware, you will need to file a Certificate of Limited Partnership with the Delaware Division of Corporations.
Do I need to have a registered agent in Delaware to start a limited partnership?
Yes, you must have a registered agent in Delaware for your limited partnership.
Can a foreign or out-of-state limited partnership do business in Delaware?
Yes, foreign and out-of-state limited partnerships can do business in Delaware if they register as a foreign limited partnership with the Delaware Division of Corporations.
How long does it take to form a limited partnership in Delaware?
It typically takes around 2-3 business days to form a limited partnership in Delaware.
What is the cost of forming a limited partnership in Delaware?
The cost to form a limited partnership in Delaware is $200.
Do I need to have a written partnership agreement to form a limited partnership in Delaware?
Although not required by law, it is highly recommended to have a written partnership agreement for your limited partnership in Delaware.
What are the requirements for a general partner in a Delaware limited partnership?
A general partner in a Delaware limited partnership must have unlimited liability for the partnership’s debts and activities.
What are the requirements for limited partners in a Delaware limited partnership?
Limited partners in a Delaware limited partnership must have limited liability for the partnership’s debts and activities.
Can a limited partner of a Delaware limited partnership participate in the management of the company?
No, limited partners cannot participate in the management of the company unless the partnership agreement provides for otherwise.
Can I convert my existing business into a limited partnership in Delaware?
Yes, you can convert an existing business into a limited partnership in Delaware.
Can I change the number of general or limited partners in a Delaware limited partnership after formation?
Yes, the number of general and limited partners in a Delaware limited partnership can be changed after formation.
What is the tax structure for a Delaware limited partnership?
Delaware does not have a state-level tax on partnership income. However, the individual partners will be subject to personal income taxes on their share of the partnership’s taxable income.
Do I need to obtain a business license to operate a limited partnership in Delaware?
It depends on the nature of your business activities. Some businesses require a license, while others do not. It is important to check with the state or local government on specific requirements prior to starting your business.
Is there any annual reporting requirement for a Delaware limited partnership?
Yes, a Delaware limited partnership must file an annual report and pay an annual tax of $300.
Are there any restrictions on doing business across state lines for a Delaware limited partnership?
No, Delaware allows limited partnerships to conduct business in other states and across state lines.
What is the liability of a limited partner in a Delaware limited partnership?
A limited partner in a Delaware limited partnership has limited liability for the partnership’s debts and obligations.
What is the liability of a general partner in a Delaware limited partnership?
A general partner in a Delaware limited partnership has unlimited liability for the partnership’s obligations.
Can a general partner be also a limited partner in a Delaware limited partnership?
Yes, a general partner can also be a limited partner in a Delaware limited partnership.
What role does the Division of Corporations play in a Delaware limited partnership’s formation?
The Division of Corporations is responsible for receiving and filing the Certificate of Limited Partnership and issuing a receipt as evidence of such filing.
What name can I use for my Delaware limited partnership?
The name of your Delaware limited partnership must be distinguishable on the records of the state.
Can I reserve a name for my Delaware limited partnership?
Yes, you can reserve a name for your Delaware limited partnership with the Delaware Division of Corporations.
How long does a name reservation last in Delaware?
A name reservation in Delaware lasts for 120 days.
Is a Delaware limited partnership required to have a business office in Delaware?
A Delaware limited partnership is required to have a registered agent located in Delaware.
Do I need a Federal Tax ID Number (EIN) for my Delaware limited partnership?
Yes, a Federal Tax ID Number (EIN) is required for all businesses, including Delaware limited partnerships.
Can I apply for a Federal Tax ID Number (EIN) online for my Delaware limited partnership?
Yes, the IRS offers an online application process for obtaining a Federal Tax ID Number (EIN) for your Delaware limited partnership.
Is there a minimum capital requirement for a Delaware limited partnership?
No, there is no minimum capital requirement for a Delaware limited partnership.
Can I use an online legal service to set up my Delaware limited partnership?
Yes, there are a variety of online legal services available to assist with the formation of a Delaware limited partnership.
How do I dissolve a Delaware limited partnership?
A Delaware limited partnership can be dissolved by filing a Certificate of Cancellation with the Delaware Division of Corporations.
What is a limited partnership?
A limited partnership is a type of business entity that consists of at least one general partner and one limited partner, formed according to Delaware’s laws.
What is the process for forming a limited partnership in Delaware?
To form a Delaware limited partnership, you must file a Certificate of Limited Partnership with the Secretary of State and pay the required fees.
How much does it cost to form a limited partnership in Delaware?
The filing fee to form a Delaware limited partnership is $200.
What are the benefits of organizing a limited partnership in Delaware?
Delaware’s laws provide strong protection for limited partners and give them flexibility in terms of management, governance, and taxation.
Can a limited partnership be created without a general partner?
No, Delaware law requires that a limited partnership have at least one general partner.
Is personal liability limited for limited partners in a Delaware limited partnership?
Yes, limited partners in a Delaware limited partnership have limited personal liability for the debts and obligations of the partnership.
Must a limited partner participate in the management of a Delaware limited partnership?
No, a limited partner may not participate in the management of a Delaware limited partnership without losing the limited liability protection it affords.
Is the registration of a Delaware limited partnership possible online?
Yes, the registration of a Delaware limited partnership can be done through the online portal.
What are the key documents that should be prepared when organizing a Delaware limited partnership?
Along with the limited partnership certificate, a partnership agreement and relevant organizational documents should be prepared.
Is Delaware a popular location for businesses to incorporate?
Yes, Delware is a popular state for incorporating due to its well-established legal system and corporate-friendly laws.
How are distributions of profits handled in a Delaware limited partnership?
Distributions of profits are typically made according to the partnership agreement unless otherwise specified.
What is the duration of a Delaware limited partnership?
A Delaware limited partnership may exist indefinitely unless its term is specified in the partnership agreement.
Can shareholders be part of a Delaware limited partnership?
A Delaware limited partnership does not have shareholders, but limited partners may own a portion of the partnership’s interest.
How does a Delaware limited partnership differ from a general partnership?
In a general partnership, all partners are liable for the debts and obligations of the partnership, while in a limited partnership, the liability of limited partners is reduced.
Can a limited partner be held liable for debts of the partnership?
A limited partner in Delaware is not personally liable for the debts and obligations of the partnership beyond its invested capital.
Is it difficult to dissolve a Delaware limited partnership?
Dissolution of a Delaware limited partnership requires the consent of all general partners, unless specified in the partnership agreement.
What is a Certificate of Limited Partnership in Delaware?
A Certificate of Limited Partnership is a document filed with the Delaware Secretary of State which establishes a new limited partnership and contains important information regarding it.
Does Delaware recognize statutory trustees in a limited partnership?
Delaware does not elect statutory trustees for limited partnerships, which are typically managed by the general partner(s).
How long does it take to form a Delaware limited partnership?
It can take up to ten business days to form a Delaware limited partnership, but expedited filing is available for an additional fee.
How do partners distribute profits in Delaware?
Profits are typically distributed according to the partnership agreement set forth by the partners, unless otherwise specified.
Are there annual requirements for being part of a Delaware limited partnership?
Yes, each Delaware limited partnership must file an annual report with the Delaware Secretary of State and pay an annual fee.
Is a registered agent required for a Delaware limited partnership?
Yes, a registered agent must be appointed for each Delaware limited partnership to receive legal documents and process them in a timely manner.
Does Delaware provide anonymity for limited partners?
Yes, in Delaware, you can remain anonymous as a limited partner by not including your name in the limited partnership certificate.
How much control does a limited partner have in a Delaware limited partnership?
Limited partners do not have control over the day-to-day decision-making of a Delaware limited partnership. However, they can have limited input depending on the partnership agreement.
What is the difference between registered agent and vest partners?
A registered agent is just the state contact, while the vest partners are also involved in agreements surrounding the finances of the business.
Can a limited partnership be converted into a different business entity?
Conversion of a limited partnership into another business entity is possible in Delaware, depending on the nature of the new entity and the factors outlined in the partnership agreement.

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Conclusion

Starting a limited partnership in Delaware 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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