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

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Start a Limited Partnership in North Dakota

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

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

Steps in Starting a Limited Partnership in North Dakota

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 Dakota. 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 Dakota

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

Step 1: Research and Preparation

Before starting a limited partnership in North Dakota, 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 Dakota.

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 Dakota 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 Dakota, 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 Dakota Business Name Search through the North Dakota Secretary of State Business Records 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 Dakota 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 Dakota.

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 $10 and mail name reservation fee of $10. 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 North Dakota is five years, which you can file in North Dakota Secretary of State.

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

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

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 Dakota laws and regulations, it’s advisable to seek legal advice from a Business Attorney in North Dakota 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 Dakota government. This process typically involves filing a Certificate of Limited Partnership with the North Dakota 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 Dakota Secretary of State. Include all necessary information and signatures, and pay the filing fee of $100.

Obtain an Employer Identification Number (EIN) from the IRS

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

Depending on your business activities and location, you may need to register for certain North Dakota taxes. Check with the North Dakota Office of State Tax Commissioner or a tax professional to determine which taxes apply to your limited partnership.

Step 5: Complying With Additional North Dakota Requirements

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

File Annual Reports 

North Dakota require limited partnerships to file Annual Reports with the North Dakota 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 North Dakota 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 Dakota

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

  • 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 Dakota, 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 Dakota?

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

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 in which a general partner manages the company and limited partners provide capital and share in the profits.
How do I start a limited partnership in North Dakota?
To start a limited partnership in North Dakota, you must file a certificate of limited partnership with the Secretary of State.
Can a limited partnership be formed by one person in North Dakota?
No, a limited partnership in North Dakota must have at least one general partner and one limited partner.
What is the role of a general partner in a limited partnership in North Dakota?
The general partner is responsible for managing the business and can be held personally liable for the company’s debts and obligations.
What is the role of a limited partner in a limited partnership in North Dakota?
The limited partner is only responsible for contributing capital and sharing in the profits.
How is a limited partnership taxed in North Dakota?
A limited partnership is considered a pass-through entity, so the profits and losses are passed through to the partners’ personal income tax returns.
Do I need a lawyer to form a limited partnership in North Dakota?
No, you don’t need a lawyer, but it’s recommended to consult with one to ensure compliance with all legal requirements.
How much does it cost to form a limited partnership in North Dakota?
The filing fee for a certificate of limited partnership in North Dakota is $100.
What information is required on a certificate of limited partnership in North Dakota?
The certificate must include the name and address of the limited partnership, the name and address of the registered agent, and the name and address of the general partner.
Is a business license required to operate a limited partnership in North Dakota?
Yes, a business license is required to operate a limited partnership in North Dakota.
Are there any annual reporting requirements for a limited partnership in North Dakota?
Yes, a limited partnership is required to file an annual report with the North Dakota Secretary of State.
How many limited partners can a limited partnership in North Dakota have?
A limited partnership in North Dakota can have an unlimited number of limited partners.
Can a limited partner also be a general partner in a limited partnership in North Dakota?
Yes, a limited partner in North Dakota can also be a general partner, but they will assume personal liability for the company’s debts and obligations.
Can a limited partnership have a different name from the name of the partners involved in North Dakota?
Yes, a limited partnership can operate under a different name, but it must file a fictitious name registration with the North Dakota Secretary of State.
How long does it take to form a limited partnership in North Dakota?
It typically takes 5-7 business days for the North Dakota Secretary of State to process a certificate of limited partnership.
Can a limited partnership raise capital through selling ownership shares in North Dakota?
No, a limited partnership cannot sell ownership shares to the public in North Dakota.
What is required to be a registered agent for a limited partnership in North Dakota?
A registered agent must be a resident of North Dakota or a licensed corporation authorized to do business in the state.
Can a limited partnership take out loans in North Dakota?
Yes, a limited partnership can take out loans, but the general partner may be held personally liable for the debt.
Can a limited partnership be taxed as a corporation in North Dakota?
Yes, a limited partnership can elect to be taxed as a corporation in North Dakota.
What is the liability of a limited partner in North Dakota?
The liability of a limited partner is limited to their investment in the partnership.
Can a limited partnership be converted to a different business structure in North Dakota?
Yes, a limited partnership can be converted to a different business structure in North Dakota, such as a corporation or an LLC.
What is the difference between a limited partnership and an LLC?
A limited partnership has both limited and general partners, while an LLC has members who all share management and liability responsibilities.
Can a limited partnership dissolve if a partner dies or withdraws in North Dakota?
Yes, a limited partnership can dissolve if a partner dies or withdraws in North Dakota, unless the partnership agreement states otherwise.
Can a limited partnership merge with another business in North Dakota?
Yes, a limited partnership can merge with another business in North Dakota, subject to state laws and regulations.
What happens if a limited partner becomes more actively involved in management in North Dakota?
If a limited partner becomes more actively involved in management, they may risk losing their limited liability protection.
Can a limited partnership own real estate in North Dakota?
Yes, a limited partnership can own real estate in North Dakota.
What is the difference between a domestic and foreign limited partnership in North Dakota?
A domestic limited partnership is formed in North Dakota, while a foreign limited partnership is formed in another state or country.
Can a limited partnership be sued in North Dakota?
Yes, a limited partnership can be sued in North Dakota, but the general partner may be held personally liable for the company’s debts and obligations.
What is a limited partnership in North Dakota?
A limited partnership is a type of business formation where two or more people come together to operate a business under a legal agreement.
Who can form a limited partnership in North Dakota?
Anyone can form a limited partnership in North Dakota as long as they follow the state’s laws and regulations.
How do I choose a name for my limited partnership in North Dakota?
You must ensure that the name you choose complies with the naming requirements of North Dakota’s Corporations Division.
Do I need an attorney to form a limited partnership in North Dakota?
No, but it’s a good idea to consult a business attorney in North Dakota to ensure that everything goes smoothly.
What does it cost to form a limited partnership in North Dakota?
The formation fee for a limited partnership in North Dakota is $135 and there may be additional fees like those from your attorney or expedited processing.
Where do I file to form a limited partnership in North Dakota?
You must file the required documents with the North Dakota Secretary of State.
What type of documents do I need to file to form a limited partnership in North Dakota?
You must file a Certificate of Limited Partnership along with any additional forms the North Dakota Secretary of State requires for this type of formation.
What is the process for forming a limited partnership in North Dakota?
To start, ensure your name isn’t taken by searching available business names in the Secretary of State’s records, filling in your documentation, and then filing it with the ND Secretary of State.
What information do I need to provide when filing my Certificate of Limited Partnership in North Dakota?
You need to share the name and address of your limited partnership’s registered agent, any other personal data required by North Dakota Secretary of State, LLC Shareholders involved, and your formation dates.
What is a registered agent, and how do I appoint one in North Dakota?
A registered agent is an individual or company designated by your limited partnership to receive legal notices, tax notifications, subpoena, or other inquiry. Submit your appointment with the ND Secretary of State when initially founding or modifying an agent to inform the organization.
Do I need an operating agreement in North Dakota when forming a limited partnership?
Legally speaking, no, but it is wise to have one that outlines operational procedures, the procedures regarding dividing profits and losses among general and limited partners, potential partner withdrawal situations, and even instances regarding whether new members may become partner.
Can a limited partner participate in the management of the limited partnership in North Dakota?
In general, no, not unless you explicitly authorized at the moment of founding your limited partnership in your Articles of Organization.
What is a general partner in North Dakota?
A general partner operates and manages the day-to-day operations representing a limited partnership. They also can be one of the limited partners in ND legal entities ordinarily.
What is a limited partner in North Dakota?
A limited partner is not be directly involved in the day-to-day operations of the limited partnership and is primarily responsible for contributing capital towards the operation of it.
Can a limited partner be held personally liable in North Dakota?
No, the constraints generally limit liability in lawsuits, under certain situations.
Are limited partnerships required to register as a foreign limited partnership before doing business in North Dakota?
Yes, if you are officially doing business in North Dakota and you are founding this partnership in another state, informing North Dakota Secretary of State through the relatively straightforward Foreign Limited Partnership process is expected before starting domestic operations to avoid facing sanctions.
Is North Dakota required to provide annual reports or license fees for limited partnerships formed in the state?
Limited Partnerships aren’t charged their incorporation price after their initial startup procedure. A member should make the initial founding dues and then pay in subsequent years to file annual Annual Report documents with the ND Secretary of State.
Can a limited partnership in North Dakota convert to another entity type or dissolve entirely?
Yes, at any given time, you may decide to change entity sorts depending on regulatory agreements in place as well as benefit or disadvantage to party depending on whether you modify the company’s structure with a limited liability access compared to a modified partnership status.
Do all limited partners in North Dakota receive the same distribution of profits and losses?
No, as Members can consent on an arrangement defining a structure, within which taxation criteria, benefits, restrictions, and potentially complementary performance contingencies are removed for several members. Nonetheless like equity holders investments resulting in profit shares are often malleable.
Can I add a member to an existing North Dakota limited partnership after formation?
Yes, an existing partnership can typically accept and amend prior Articles of Organization within regulatory guidelines to accommodate new members.
Can a limited partnership in North Dakota own assets in its name?
Yes, yes, ND entities usually engage as sellers, customers, buy equipment arrangements, and more operations should their LLP expand despite factors surrounding corporate enterprises may differ.
Do I need a physical address to register my limited partnership in North Dakota?
Generally speaking, it is needed that we provide an address, which reflects upon the physical site of the employment center of the holding business typically.
How can I protect my intellectual property as a partner in a North Dakota limited partnership?
LVL Global, our partner platform, can help handle intellectual property documents connected to your overall functioning of a ND ETF, to detail your adequate control over authoritative features surrounding the registered subject.
How long does a North Dakota limited partnership remain valid?
North Dakota LLPs are considered ongoing until formally unincorporated. Such partnership dissolutions must be environmentally sustainable via the policy of receiving a closure documentation surging governance authorities.
Does a North Dakota limited partnership require a business license?
Beside various legislation at play with Arizona jurisdictions, no conventional license is typically required, however businesses may require to follow some agreements depending on the desired form of trading functions over local and future legislatures.
Can I transfer ownership in a North Dakota limited partnership?
Most likely, sure. Limited Partnerships tend to be conducive environments to merging, selective asset division structures, alterations in referral in ownership, although being sensitive due to structure positions properly that influence tax considerations overall.
Do I need to hold annual meetings for my North Dakota limited partnership?
While certain company positions are scheduled for recurrent inspections on an annual basis, parts of regulatory governance are solicited to operate devoid of a scheduler per policy be activated depending on circumstances congruent within specific stock sequences.
How can I dissolve my North Dakota limited partnership?
LLPs with holdings difficulty might regularize in writing for mediation try to settle compensation that can be closed following representing fiscal arrangements for allocation of not only recovery from the filing price per law provider.

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Conclusion

Starting a limited partnership in North Dakota 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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