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

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Start a Limited Partnership in Indiana

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

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

Steps in Starting a Limited Partnership in Indiana

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 Indiana. 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 Indiana

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

Step 1: Research and Preparation

Before starting a limited partnership in Indiana, 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 Indiana.

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

Naming requirements for a Limited Partnership in Indiana 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 Indiana.

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 $20 and mail name reservation fee of $20. 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 $35. In addition, the DBA’s validity in Indiana is Indefinite, which you can file in Indiana Secretary of State.

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

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

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 Indiana laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Indiana 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 Indiana government. This process typically involves filing a Certificate of Limited Partnership with the Indiana 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 Indiana Secretary of State. Include all necessary information and signatures, and pay the filing fee of $90.

Obtain an Employer Identification Number (EIN) from the IRS

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

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

Step 5: Complying With Additional Indiana Requirements

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

File Biennial Reports 

Indiana require limited partnerships to file Biennial Reports with the Indiana 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 Indiana 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 Indiana

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

  • 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 Indiana, 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 Indiana?

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

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 business structure where there are one or more general partners who manage the business and one or more limited partners who invest in the business and have limited liability.
How do I start a limited partnership in Indiana?
To start a limited partnership in Indiana, you will need to file a Certificate of Limited Partnership with the Secretary of State.
Who can be a general partner in a limited partnership in Indiana?
Anyone can be a general partner in a limited partnership in Indiana, including individuals and other businesses.
Who can be a limited partner in a limited partnership in Indiana?
Anyone can be a limited partner in a limited partnership in Indiana, including individuals and other businesses.
What are the main advantages of starting a limited partnership in Indiana?
The main advantages of starting a limited partnership in Indiana include limited liability for its limited partners and the flexibility to structure the partnership in a variety of ways.
What are the main disadvantages of starting a limited partnership in Indiana?
The main disadvantages of starting a limited partnership in Indiana include the potential for personal liability for its general partners and increased paperwork and filing requirements compared to other business structures.
How many people are needed to start a limited partnership in Indiana?
To start a limited partnership in Indiana, you need at least one general partner and one limited partner.
How much does it cost to start a limited partnership in Indiana?
The cost to start a limited partnership in Indiana is $90 to file a Certificate of Limited Partnership and $30 for a Certified Copy.
What is the process for filing a Certificate of Limited Partnership in Indiana?
To file a Certificate of Limited Partnership in Indiana, you must complete the form and file it with the Secretary of State, along with the required fees.
How long does it take to start a limited partnership in Indiana?
Once you file a Certificate of Limited Partnership and pay the required fees, it can take up to seven business days for the Secretary of State to process and approve it.
Is it necessary to have a lawyer to start a limited partnership in Indiana?
While it is not required to have a lawyer to start a limited partnership in Indiana, it can be helpful to have legal guidance when creating legal documents and understanding the legal requirements of the business structure.
What are the tax implications of starting a limited partnership in Indiana?
Limited partnerships in Indiana generally do not pay taxes at the partnership level, but any profits or losses pass through to the partners and must be reported on their personal tax returns.
Do I need to have a partnership agreement to start a limited partnership in Indiana?
While it is not required to have a partnership agreement to start a limited partnership in Indiana, it is highly recommended to have a written agreement outlining the terms of the partnership.
What should be included in a partnership agreement for a limited partnership in Indiana?
A partnership agreement for a limited partnership in Indiana should include details about the capital contributions of each partner, the roles and responsibilities of each partner, and the distribution of profits and losses.
Can a limited partnership in Indiana have more than one general partner?
Yes, a limited partnership in Indiana can have multiple general partners.
Are there any naming restrictions for limited partnerships in Indiana?
Limited partnerships in Indiana must include the words “Limited Partnership” or “L.P.” in their name.
What is the role of a limited partner in a limited partnership in Indiana?
The role of a limited partner in a limited partnership in Indiana is primarily as an investor in the business who has limited liability.
What is the role of a general partner in a limited partnership in Indiana?
The role of a general partner in a limited partnership in Indiana is to manage the business and assume unlimited personal liability for its debts and obligations.
What happens if a general partner resigns or dies in a limited partnership in Indiana?
If a general partner resigns or dies in a limited partnership in Indiana, the remaining general partner(s) assume responsibility for managing the business unless otherwise specified in the partnership agreement.
Can a limited partner become a general partner in a limited partnership in Indiana?
Yes, a limited partner in a limited partnership in Indiana can become a general partner if they assume responsibility for managing the business and assume unlimited personal liability.
Is there a maximum number of partners in a limited partnership in Indiana?
No, there is no maximum number of partners in a limited partnership in Indiana.
Can a limited partnership in Indiana be dissolved before its expiration date?
Yes, a limited partnership in Indiana can be dissolved before its expiration date if all partners agree to dissolve it or if certain conditions outlined in the partnership agreement are met.
What happens to the assets of a limited partnership in Indiana if it is dissolved?
If a limited partnership in Indiana is dissolved, the assets are typically sold and the proceeds are distributed to the partners based on their ownership percentage.
Are limited partners liable for the debts and obligations of a limited partnership in Indiana?
No, limited partners in a limited partnership in Indiana have limited liability and are not personally liable for the debts and obligations of the business.
How frequently do limited partnerships in Indiana need to file annual reports?
Limited partnerships in Indiana are required to file an annual report with the Secretary of State each year.
What happens if a limited partnership in Indiana fails to file its annual report?
If a limited partnership in Indiana fails to file its annual report, it may be subject to penalties and may eventually be dissolved by the Secretary of State.
Can a limited partner in a limited partnership in Indiana take an active role in managing the business?
While limited partners in a limited partnership in Indiana typically have limited liability and do not play an active role in managing the business, a partnership agreement can allow for limited partners to take on certain management responsibilities.
Can a limited partnership in Indiana be converted to another business structure, such as an LLC, later on?
Yes, a limited partnership in Indiana can be converted to another business structure, but it may require approval from all partners and the Secretary of State.
Can a limited partnership be formed in Indiana?
Yes, Indiana law permits the formation of limited partnerships.
How many people are required to start a limited partnership in Indiana?
At least two people are required to start a limited partnership in Indiana
Do both partners need to be Indiana residents to start a limited partnership in Indiana?
No, both partners do not need to be Indiana residents to start a limited partnership in Indiana.
Is there a fee to start a limited partnership in Indiana?
Yes, there is a fee to start a limited partnership in Indiana, which is currently $90.
What is the process to start a limited partnership in Indiana?
The process involves filing a certificate of limited partnership with the Indiana Secretary of State.
Can I file the certificate of limited partnership online in Indiana?
Yes, the certificate of limited partnership can be filed online in Indiana.
Are there any deadlines to file the certificate of limited partnership in Indiana?
No, there are no deadlines to file the certificate of limited partnership in Indiana, but it should be filed before engaging in business activities.
What information is required in the certificate of limited partnership in Indiana?
The requirements include the names and addresses of the general and limited partners, the name of the limited partnership, and the appointment of a registered agent.
What is a registered agent in Indiana?
A registered agent is a person designated to receive legal documents on behalf of the limited partnership.
Can I serve as the registered agent for my own limited partnership in Indiana?
Yes, you can serve as the registered agent for your own limited partnership in Indiana only if you reside in the state of Indiana or have a street or highway address within Indiana.
Are limited partners liable for the debts of the limited partnership in Indiana?
No, limited partners have limited liability and are not liable for the debts of the limited partnership in Indiana.
Can a limited partnership operate under a fictitious name in Indiana?
Yes, as long as a certificate of assumed business name has been filed with the Indiana Secretary of State.
Does Indiana require limited partnerships to have a partnership agreement?
No, Indiana does not require limited partnerships to have a partnership agreement.
What is the advantage of having a partnership agreement for a limited partnership in Indiana?
A partnership agreement sets forth the rights and duties of each partner and can be helpful in resolving disputes.
Can a limited partner participate in the management of the business in Indiana?
No, limited partners cannot participate in the management of the business in Indiana.
What is the difference between a general and limited partner in Indiana?
General partners have unlimited liability and control of the business while limited partners have limited liability and no control over the business.
Is there a requirement to keep minutes of meetings for a limited partnership in Indiana?
There is no legal requirement for the limited partnership in Indiana to keep minutes of meetings, but it is a good practice to have documentation.
Are limited partnerships in Indiana required to file tax returns?
Yes, limited partnerships in Indiana are required to file a federal partnership tax return and possibly a state tax return as well.
Is a limited partnership in Indiana required to obtain any permits or licenses?
Yes, depending on the type of business, a limited partnership in Indiana may be required to obtain permits or licenses.
Can a limited partnership in Indiana take out a loan or credit cards?
Yes, a limited partnership in Indiana can take out loans or credit card in its own name.
Can a general partner withdraw money from the limited partnership in Indiana?
Yes, a general partner can withdraw money from the limited partnership in Indiana.
Are profits and losses divided equally among all partners in a limited partnership in Indiana?
No, profits and losses are divided in accordance with the partnership agreement or as set by Indiana law.
Is a limited partnership in Indiana taxed as a separate entity from its partners?
No, for tax purposes, a limited partnership in Indiana is a pass-through entity whereby the business income or loss is passed on to its partners.
How much personal liability do general partners have in a limited partnership in Indiana?
General partners have unlimited personal liability in a limited partnership in Indiana.
Is it required to publish the formation of the limited partnership in a newspaper in Indiana?
No, it is not required by Indiana law to publish the formation of the limited partnership in a newspaper.
Is a limited partnership registered in Indiana recognized in other states?
Yes, a limited partnership registered in Indiana is recognized in all states.
What happens if a limited partner dies in Indiana?
If a limited partner dies in Indiana, their interest in the limited partnership passes to their heir or devisee as provided in the partnership agreement or under Indiana law.

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Conclusion

Starting a limited partnership in Indiana 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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