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

by
Start a Limited Partnership in North Carolina

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

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

Steps in Starting a Limited Partnership in North Carolina

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 North Carolina. 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 North Carolina

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

Step 1: Research and Preparation

Before starting a limited partnership in North Carolina, 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 North Carolina.

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

Naming requirements for a Limited Partnership in North Carolina 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 North Carolina.

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 $30 and mail name reservation fee of $30. 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 $26. In addition, the DBA’s validity in North Carolina is Indefinite, which you can file in North Carolina Secretary of State.

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

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

LLC Service

Rating & Pricing

Top Features

Learn More

#1 Recommendation

$299 Per Year

  • Free LLC Formation

  • RA service in all states

  • Legal consultation

Learn More

$125 Per Year

  • Flat price for RA service

  • LLC formation package

  • Fast service

Learn More

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 North Carolina.

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 North Carolina laws and regulations, it’s advisable to seek legal advice from a Business Attorney in North Carolina 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 North Carolina government. This process typically involves filing a Certificate of Limited Partnership with the North Carolina 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 North Carolina Secretary of State. Include all necessary information and signatures, and pay the filing fee of $50.

Obtain an Employer Identification Number (EIN) from the IRS

After registering your limited partnership with the North Carolina government, you’ll need to obtain North Carolina 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.

Recommended: If you would like to get your EIN easier, Legalzoom’s EIN services will obtain your tax ID number a breeze. Their knowledgeable team and easy-to-use platform allow businesses to quickly and confidently navigate the process. We recommend using –

LegalZoom – Pricing at $79

Register For North Carolina Taxes

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

Step 5: Complying With Additional North Carolina Requirements

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

File Annual Reports 

North Carolina require limited partnerships to file Annual Reports with the North Carolina 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. 

Recommended: Legalzoom’s annual report services provide a comprehensive and streamlined approach to ensuring businesses maintain compliance and transparency. Their attention to detail and dedication to client satisfaction make them the go-to choice for all your annual reporting needs. We recommend using –

LegalZoom – Starts at $99 + filing fees

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 North Carolina 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 North Carolina

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

  • 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 North Carolina, 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 North Carolina?

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

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 North Carolina?
A limited partnership in North Carolina is a company with two or more owners, including at least one general partner and one limited partner.
What are the advantages of starting a limited partnership in North Carolina?
The advantages of starting a limited partnership in North Carolina include limitations on personal liability and flexible income and tax structures.
What is the process for forming a limited partnership in North Carolina?
The process for forming a limited partnership in North Carolina involves filing a certificate of limited partnership with the Secretary of State and paying the required fees.
What is a general partner in a limited partnership in North Carolina?
A general partner in a limited partnership in North Carolina is someone who is actively managing the partnership and has unlimited personal liability for its debts and obligations.
What is a limited partner in a limited partnership in North Carolina?
A limited partner in a limited partnership in North Carolina is someone who has limited personal liability for the partnership’s debts and obligations and does not play an active role in managing the partnership.
Can a limited partnership in North Carolina have more than one general partner?
Yes, a limited partnership in North Carolina can have more than one general partner.
Can a limited partnership in North Carolina have more than one limited partner?
Yes, a limited partnership in North Carolina can have more than one limited partner.
Are there any restrictions on who can be a limited partner in a limited partnership in North Carolina?
There are no specific restrictions on who can be a limited partner in a limited partnership in North Carolina.
Are there any restrictions on who can be a general partner in a limited partnership in North Carolina?
There are no specific restrictions on who can be a general partner in a limited partnership in North Carolina.
What is the liability of the limited partner in a limited partnership in North Carolina?
The liability of the limited partner in a limited partnership in North Carolina is generally limited to their investment in the partnership.
Can the limited partner in a limited partnership in North Carolina also be a general partner?
No, the limited partner in a limited partnership in North Carolina cannot also be a general partner.
What is the duration of a limited partnership in North Carolina?
The duration of a limited partnership in North Carolina can be for a set period of time or indefinitely.
How is a limited partnership in North Carolina taxed?
A limited partnership in North Carolina is generally taxed as a pass-through entity, where the profits and losses are passed through to the partners’ personal income tax returns.
Can a limited partnership in North Carolina engage in any business activity?
Yes, a limited partnership in North Carolina can engage in any business activity as long as it is legal and does not violate the partnership agreement.
Is it necessary to have a written agreement for a limited partnership in North Carolina?
Yes, a written agreement, known as a partnership agreement, is necessary for a limited partnership in North Carolina.
What should be included in a partnership agreement for a limited partnership in North Carolina?
A partnership agreement for a limited partnership in North Carolina should include the rights and responsibilities of the partners, the distribution of profits and losses, and the management of the partnership.
Do all limited partnerships in North Carolina have to register with the Secretary of State?
Yes, all limited partnerships in North Carolina have to register with the Secretary of State by filing a certificate of limited partnership.
How long does it take to form a limited partnership in North Carolina?
It typically takes around 5-7 business days to form a limited partnership in North Carolina.
How much does it cost to form a limited partnership in North Carolina?
It costs $125 to file a certificate of limited partnership in North Carolina.
What are the reporting requirements for a limited partnership in North Carolina?
A limited partnership in North Carolina is required to file an annual report with the Secretary of State each year.
Is a business license required to operate a limited partnership in North Carolina?
Depending on the location and nature of the business, a business license may be required to operate a limited partnership in North Carolina.
Does a limited partnership in North Carolina have to obtain a tax ID number?
Yes, a limited partnership in North Carolina has to obtain a tax ID number.
Can a limited partnership in North Carolina be converted into other business structures?
Yes, a limited partnership in North Carolina can be converted into other business structures, such as a corporation or a limited liability company.
Can a limited partnership in North Carolina change its partnership agreement?
Yes, a limited partnership in North Carolina can change its partnership agreement, but any changes have to be approved by all partners.
Can a limited partnership in North Carolina terminate?
Yes, a limited partnership in North Carolina can terminate if all partners agree to dissolve the partnership, or if the partnership agreement specifies a method of termination.
Is it necessary to have a registered agent for a limited partnership in North Carolina?
Yes, a limited partnership in North Carolina is required to have a registered agent who resides in the state.
Can a registered agent for a limited partnership in North Carolina be an individual or a business entity?
A registered agent for a limited partnership in North Carolina can be either an individual or a business entity as long as they are authorized to do business in the state.
Is it possible to form a limited partnership in North Carolina online?
No, it is not possible to form a limited partnership in North Carolina online, but the forms can be downloaded from the Secretary of State’s website.
What is a limited partnership?
A limited partnership is a business structure that involves one or more general partners who manage the business, and one or more limited partners who are only liable for the amount of their investment.
What are the requirements for starting a limited partnership in North Carolina?
To start a limited partnership in North Carolina, you must file a certificate of limited partnership with the North Carolina Secretary of State.
What information do I need to include in a certificate of limited partnership in North Carolina?
The certificate of limited partnership in North Carolina should include the name and address of each general and limited partner, the name of the limited partnership, and the mailing address of its principal place of business.
Can I use a registered agent service to file the certificate of limited partnership in North Carolina?
Yes, you can use a registered agent service to file the certificate of limited partnership in North Carolina.
How much does it cost to file a certificate of limited partnership in North Carolina?
The fee for filing a certificate of limited partnership in North Carolina is $125.
Do I need to have a written partnership agreement to form a limited partnership in North Carolina?
While not required by law in North Carolina, it is strongly recommended to have a written partnership agreement to avoid future legal disputes.
Are there any annual fees or requirements for maintaining a limited partnership in North Carolina?
Yes, limited partnerships in North Carolina are required to file an annual report and pay a $20 fee.
Can a limited partner participate in the management of the business?
Limited partners cannot participate in the management of a limited partnership in North Carolina without losing their limited liability status.
What is a foreign limited partnership?
A foreign limited partnership is one that is formed outside North Carolina and does business in the state.
Can a foreign limited partnership do business in North Carolina?
Yes, a foreign limited partnership can do business in North Carolina, provided it registers with the North Carolina Secretary of State and pays the appropriate fee.
What information do I need to include in a foreign limited partnership registration in North Carolina?
The information needed to register a foreign limited partnership in North Carolina will vary, but it must include the name, state or country of incorporation, and a registered agent.
How long does it take to register a foreign limited partnership in North Carolina?
It typically takes 1-2 weeks to register a foreign limited partnership in North Carolina.
Can a limited partnership convert to another business structure in North Carolina?
Yes, a limited partnership can convert to another business structure in North Carolina.
How do I dissolve a limited partnership in North Carolina?
To dissolve a limited partnership in North Carolina, you must file a certificate of cancellation with the North Carolina Secretary of State.
What happens to the limited partnership’s liabilities after it is dissolved in North Carolina?
The limited partnership’s liabilities are still valid after dissolution in North Carolina, and the partners can be held responsible for unpaid debts.
Can I change the name of a limited partnership in North Carolina?
Yes, you can change the name of a limited partnership in North Carolina by filing an amendment to the certificate of limited partnership with the North Carolina Secretary of State.
How do I change the address of a limited partnership in North Carolina?
You can change the address of a limited partnership by filing a change of address form with the North Carolina Secretary of State.
What is a registered agent?
A registered agent is an individual or entity appointed by a business to receive legal and official documents on behalf of the business.
Does a limited partnership in North Carolina need a registered agent?
Yes, a limited partnership in North Carolina must have a registered agent to receive legal and official documents.
Can a partner be a registered agent for a limited partnership in North Carolina?
Yes, a partner can be a registered agent for a limited partnership in North Carolina.
Can a limited partner in North Carolina be held liable for the actions of the general partner?
Yes, a limited partner may be held liable for the actions of the general partner if they participate in the management of the business.
What are the tax implications of a limited partnership in North Carolina?
Depending on the structure of the partnership, a limited partnership may be taxed as a partnership or as a corporation in North Carolina.
Can a limited partnership own real estate in North Carolina?
Yes, a limited partnership can own and operate real estate in North Carolina.
Can a limited partnership own other businesses in North Carolina?
Yes, a limited partnership can own other businesses in North Carolina, either directly or through subsidiaries.
What is a domestic limited partnership?
A domestic limited partnership is a limited partnership formed and doing business in North Carolina.
Can I register a domestic limited partnership in North Carolina using a DBA (doing business as) name?
No, North Carolina does not allow a domestic limited partnership to use a DBA name.
Is liability protection limited to only limited partners in a limited partnership in North Carolina?
Yes, limited partners in a limited partnership in North Carolina have limited liability protection, while general partners have unlimited liability.
Are there any restrictions on who can be a partner in a limited partnership in North Carolina?
Anyone can be a partner in a North Carolina limited partnership, as long as they are not disqualified by law or criminal conviction.
What is required to file an annual report for a limited partnership in North Carolina?
The North Carolina Annual Report requires your company name, information regarding your company director(s) and officer(s), the address of your principle business location, along with specific contact information, the address to where official mail is directed, your NAIC, SIC or NAICS information, and provide updated Asset Information and Liability Disclosure.
Are there any penalties for late filing for the annual report of the limited partnership in North Carolina?
Yes, there is a penalty of $25 for late filing of the annual report past its due date in North Carolina.

Also Read

Conclusion

Starting a limited partnership in North Carolina 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.

Leave a Comment