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

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Start a Limited Partnership in Minnesota

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

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

Steps in Starting a Limited Partnership in Minnesota

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 Minnesota. 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 Minnesota

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

Step 1: Research and Preparation

Before starting a limited partnership in Minnesota, 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 Minnesota.

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

Naming requirements for a Limited Partnership in Minnesota 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 Minnesota.

If the limited partnership name is available, you may choose to reserve it for a specific period of 1 year by filing a name reservation application and paying the online name reservation fee of $35 and mail name reservation fee of $55. 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 $50 for online filing and $30 for offline filing. In addition, the DBA’s validity in Minnesota is one year, which you can file in Minnesota Secretary of State.

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

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

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 Minnesota laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Minnesota 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 Minnesota government. This process typically involves filing a Certificate of Limited Partnership with the Minnesota 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 Minnesota Secretary of State. Include all necessary information and signatures, and pay the filing fee of $135.

Obtain an Employer Identification Number (EIN) from the IRS

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

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

Step 5: Complying With Additional Minnesota Requirements

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

File Annual Reports 

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

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

  • 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 Minnesota, 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 Minnesota?

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

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 is at least one general partner who has management control and unlimited liability, and at least one limited partner who has limited liability but no management control.
How do I start a limited partnership in Minnesota?
To start a limited partnership in Minnesota, you need to file a Certificate of Limited Partnership with the Minnesota Secretary of State and pay the required filing fee.
Is there a fee for filing a Certificate of Limited Partnership in Minnesota?
Yes, there is a filing fee for the Certificate of Limited Partnership in Minnesota.
Can I file the Certificate of Limited Partnership online in Minnesota?
Yes, you can file the Certificate of Limited Partnership online through the Minnesota Secretary of State’s website.
Are there any residency requirements to start a limited partnership in Minnesota?
There are no specific residency requirements to start a limited partnership in Minnesota, but you must have a registered agent with a physical address in Minnesota.
What is a registered agent in Minnesota?
A registered agent is a person or entity that receives legal and official documents on behalf of a business in Minnesota.
Can I be my own registered agent in Minnesota?
Yes, you can be your own registered agent in Minnesota if you have a physical address in the state.
What is the difference between a general partner and a limited partner in Minnesota?
A general partner in Minnesota has management control and unlimited liability in a limited partnership, while a limited partner has limited liability but no management control.
Do all limited partnerships in Minnesota have to have a general partner?
Yes, every limited partnership in Minnesota must have at least one general partner.
What is a Limited Liability Limited Partnership in Minnesota?
A Limited Liability Limited Partnership is a partnership that offers its limited partners limited liability protection like an LLC does, but it’s still classified as a partnership for tax purposes in Minnesota.
Can foreign businesses start limited partnerships in Minnesota?
Yes, foreign businesses are allowed to form limited partnerships in Minnesota but they must follow certain requirements regarding registered agents and filings.
How do the partners of a limited partnership in Minnesota split profits and losses?
The partners of a limited partnership in Minnesota split the profits and losses based on their agreed-upon partnership agreement.
Do limited partners pay self-employment tax in Minnesota?
No, limited partners do not pay self-employment tax in Minnesota because they are passive investors.
Do I need to file for a tax ID number for my limited partnership in Minnesota?
Yes, limited partnerships in Minnesota are required to have a federal tax ID number, also known as an employer identification number (EIN).
Is there a limit on the number of limited partners in a Minnesota limited partnership?
There is no limit on the number of limited partners in a Minnesota limited partnership.
How long does it take to form a limited partnership in Minnesota?
The processing time for a Limited Partnership in Minnesota is typically around 5 to 7 business days if filed online.
Can I change the name of my limited partnership after filing in Minnesota?
Yes, you can change the name of your limited partnership in Minnesota by filing an amendment with the Minnesota Secretary of State.
What should I include in my partnership agreement for a limited partnership in Minnesota?
Your partnership agreement for a limited partnership in Minnesota should include information about partners, their contributions, distribution of profits/losses, management decisions, taxation arrangements, among others.
How is a limited partnership in Minnesota taxed?
A limited partnership in Minnesota is a pass-through entity where profits flow through to individual partners based on their profit shares and get taxed accordingly on their tax returns.
What is a Certificate of Authority in relation to a limited partnership in Minnesota?
A Certificate of Authority is a certificate issued by the Minnesota Secretary of State to foreign businesses authorized to operate in Minnesota due to their registration in their home state.
Does Minnesota require any ongoing filing requirements for limited partnerships?
Yes, limited partnerships in Minnesota must file an annual report and pay an annual renewal fee in order to remain in good standing.
What is the deadline for submitting an annual report for a Limited Partnership in Minnesota?
The deadline for submitting an annual report is December 31, regardless of the date your partnership was formed in Minnesota.
Can I dissolve my limited partnership in Minnesota?
Yes, you can dissolve your limited partnership in Minnesota by filing a Notice of Dissolution with the Minnesota Secretary of State.
When does a Limited Partnership dissolution become effective in Minnesota?
A Limited Partnership dissolution becomes effective in Minnesota upon approval by the Minnesota Secretary of State of the Notice of Dissolution.
Can I reinstate my dissolved Limited Partnership in Minnesota?
Yes, a dissolved Limited Partnership can be reinstated as long as all past due requirements have been filed timely, that includes the annual renewal, reports, fees and taxes.
What rights do limited partners have in Minnesota?
Limited partners in Minnesota have limited liability but no management control over the partnership unless specified in the partnership agreement.
Does a Minnesota limited partnership have to hold annual meetings?
There are no specific requirements for annual meetings for Minnesota Limited Partnerships. However it’s recommended to have annual meetings so that partners may convene and go over the partnership operations during the year.
What is a limited partnership in Minnesota?
A limited partnership in Minnesota is a business structure that has at least one general partner and one limited partner.
How do I form a limited partnership in Minnesota?
You can form a limited partnership in Minnesota by filing a Certificate of Limited Partnership with the Minnesota Secretary of State.
What information needs to be included in the Certificate of Limited Partnership in Minnesota?
The Certificate of Limited Partnership in Minnesota needs to include the name of the partnership, the names and addresses of the general and limited partners, and the business address of the partnership.
Do I need to have a registered agent in Minnesota to form a limited partnership?
Yes, you need to have a registered agent in Minnesota to form a limited partnership.
Can I be my own registered agent in Minnesota for my limited partnership?
Yes, you can be your own registered agent in Minnesota for your limited partnership.
Is an LLC taxable in Minnesota?
Yes, an LLC is taxable in Minnesota.
Does a limited partnership in Minnesota need to file an annual report?
Yes, a limited partnership in Minnesota needs to file an annual report.
What is the deadline for filing the annual report for a limited partnership in Minnesota?
The deadline for filing the annual report for a limited partnership in Minnesota is December 31st of each year.
What happens if I miss the deadline for filing the annual report for my limited partnership in Minnesota?
If you miss the deadline for filing the annual report for your limited partnership in Minnesota, you may be subject to penalties or the revocation of your partnership status.
Does a limited partnership in Minnesota need to obtain any local business licenses or permits?
Yes, a limited partnership in Minnesota may need to obtain local business licenses or permits, depending on the nature of the business.
Are there any special tax benefits to forming a limited partnership in Minnesota?
There are no special tax benefits to forming a limited partnership in Minnesota.
Can I have more than one general partner in my limited partnership in Minnesota?
Yes, you can have more than one general partner in your limited partnership in Minnesota.
Can a limited partner in Minnesota participate in the management of the partnership?
No, a limited partner in Minnesota cannot participate in the management of the partnership.
How much does it cost to form a limited partnership in Minnesota?
It costs $155 to file a Certificate of Limited Partnership in Minnesota.
What is the role of the general partner in a limited partnership in Minnesota?
The general partner in a limited partnership in Minnesota is responsible for the day-to-day management of the partnership.
What is the role of the limited partner in a limited partnership in Minnesota?
The limited partner in a limited partnership in Minnesota is a passive investor who typically does not participate in the management of the partnership.
Can a limited partner in Minnesota lose more than their investment in the partnership?
No, a limited partner in Minnesota cannot lose more than their investment in the partnership.
Can a general partner in Minnesota be held personally liable for the debts of the partnership?
Yes, a general partner in Minnesota can be held personally liable for the debts of the partnership.
Can I change my limited partnership agreement in Minnesota after I form the partnership?
Yes, you can change your limited partnership agreement in Minnesota after you form the partnership with the agreement of all partners.
What types of businesses are best suited to forming a limited partnership in Minnesota?
Limited partnerships in Minnesota are best suited to businesses that have passive investors who do not want to be involved in the management of the business.
What is a limited liability partnership in Minnesota?
A limited liability partnership in Minnesota is a type of partnership that provides limited liability protection for all partners.
Can I convert my existing business to a limited partnership in Minnesota?
Yes, you can convert your existing business to a limited partnership in Minnesota.
Can a limited partnership in Minnesota have an unlimited number of limited partners?
Yes, a limited partnership in Minnesota can have an unlimited number of limited partners.
How do I dissolve a limited partnership in Minnesota?
You can dissolve a limited partnership in Minnesota by filing a Certificate of Cancellation with the Minnesota Secretary of State.
Can I use a PO Box as the business address for my limited partnership in Minnesota?
No, you cannot use a PO Box as the business address for your limited partnership in Minnesota.
What is the difference between a limited partnership and a general partnership in Minnesota?
In a general partnership in Minnesota, all partners share in the management of the business and are jointly and severally liable for the debts of the partnership. In a limited partnership in Minnesota, there is at least one general partner who manages the business and is personally liable for the debts of the partnership, and there are one or more limited partners who are passive investors and are not liable beyond their investment.

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Conclusion

Starting a limited partnership in Minnesota 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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