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

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Start a Limited Partnership in South Carolina

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

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

Steps in Starting a Limited Partnership in South 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 South 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 South Carolina

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

Step 1: Research and Preparation

Before starting a limited partnership in South 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 South 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 South 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 South 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 South Carolina Business Name Search through the South Carolina Secretary of State Business Filings Search to ensure the name you’ve chosen is available and not already used by another business.

Naming requirements for a Limited Partnership in South 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 South 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 $25 and mail name reservation fee of $25. 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 $10. In addition, the DBA’s validity in South Carolina is five years, which you can file in South Carolina Secretary of State.

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

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

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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 South 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 South Carolina laws and regulations, it’s advisable to seek legal advice from a Business Attorney in South 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 South Carolina government. This process typically involves filing a Certificate of Limited Partnership with the South 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 South Carolina Secretary of State. Include all necessary information and signatures, and pay the filing fee of $110.

Obtain an Employer Identification Number (EIN) from the IRS

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

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Register For South Carolina Taxes

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

Step 5: Complying With Additional South Carolina Requirements

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

File Annual Reports 

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

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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 South 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 South Carolina

Here are some key advantages of forming a limited partnership in South 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 South 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 South Carolina?

Yes, a foreign Limited Partnership can do business in South Carolina by registering as a foreign LP with the South 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 South 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 South Carolina?
A limited partnership in South Carolina is a type of partnership where there are one or more general partners and one or more limited partners.
What is the process to start a limited partnership in South Carolina?
To start a limited partnership in South Carolina, you must file a Certificate of Limited Partnership with the South Carolina Secretary of State.
What are the advantages of starting a limited partnership in South Carolina?
South Carolina limited partnerships offer several advantages, such as limited liability protection and pass-through taxation.
What are the risks of starting a limited partnership in South Carolina?
Possible risks of starting a limited partnership in South Carolina include losses that exceed the amount invested, potential personal liability for general partners, and dissolution issues.
What is the difference between a general partner and a limited partner in a South Carolina limited partnership?
A general partner in a South Carolina limited partnership has unlimited personal liability for the partnership’s debts and obligations, while a limited partner has limited personal liability and is not involved in the management of the partnership.
Can a South Carolina limited partnership have only one partner?
Yes, South Carolina allows for a limited partnership to have one general partner and one limited partner.
What is the filing fee for a Certificate of Limited Partnership in South Carolina?
The filing fee for a Certificate of Limited Partnership in South Carolina is $50.
How long does it take to process a Certificate of Limited Partnership filing in South Carolina?
It generally takes two to three business days to process a Certificate of Limited Partnership filing in South Carolina.
What information is required to file a Certificate of Limited Partnership in South Carolina?
You must provide the name and address of the limited partnership, the name and address of each general and limited partner, and the name and address of the registered agent.
Can I be a general and limited partner in a South Carolina limited partnership?
Yes, South Carolina law allows for partners to have dual roles as both general and limited partners.
Does a South Carolina limited partnership need a written agreement?
While not required by law, it is highly recommended to have a written partnership agreement outlining the roles and responsibilities of each partner in a South Carolina limited partnership.
Does South Carolina tax limited partnerships?
South Carolina does not tax limited partnerships, but each partner is responsible for paying taxes on their share of the partnership’s income.
Can a limited partner participate in managing the South Carolina limited partnership?
A limited partner cannot participate in managing the South Carolina limited partnership unless this is specifically allowed by the partnership agreement.
What is a registered agent, and does a South Carolina limited partnership need one?
A registered agent is an individual or a business designated to receive legal and tax documents on behalf of the South Carolina limited partnership. Yes, a South Carolina limited partnership needs to have a registered agent.
Can non-US residents be general or limited partners in a South Carolina limited partnership?
Yes, non-US residents can participate as general or limited partners in a South Carolina limited partnership.
Can I change the name of a South Carolina limited partnership?
Yes, it’s possible to change the name of a South Carolina limited partnership by filing a Certificate of Amendment with the Secretary of State.
What happens if a South Carolina limited partnership does not have a registered agent?
Without a registered agent, a South Carolina limited partnership risks losing its good standing status, incurring fines, and not being able to receive important documents.
What does it mean to have “limited liability” as a limited partner in a South Carolina limited partnership?
Limited liability means that a limited partner’s financial liability is limited to the amount of their investment.
What are some common industries that use South Carolina limited partnerships?
South Carolina limited partnerships are commonly used in industries such as real estate, oil and gas, and large-scale investment ventures.
What are some disadvantages of a South Carolina limited partnership compared to other business entities?
Possible disadvantages of South Carolina limited partnerships include more formalities required by law, not being allowed to raise capital by issuing stock, and the potential for personal liability by general partners.
Can a South Carolina limited partnership have an unlimited number of partners?
Yes, there is no limit on the number of partners in a South Carolina limited partnership.
Is it possible to dissolve a South Carolina limited partnership?
Yes, it is possible to dissolve a South Carolina limited partnership by filing Articles of Termination with the Secretary of State.
How can I contact the South Carolina Secretary of State for limited partnership questions?
The South Carolina Secretary of State’s Office can be contacted by phone, email, or at their physical address.
Can a South Carolina limited partnership legally do business in other states?
Yes, a South Carolina limited partnership can legally do business in other states, but may be required to register as a foreign entity in those states.
What are some common mistakes made when creating a South Carolina limited partnership?
Common mistakes may include failing to have a written partnership agreement in place, not designating a registered agent, or failing to comply with state filing requirements.
Are limited partners required to file tax returns in South Carolina?
Yes, all partners must file personal income tax returns in South Carolina on their portion of the limited partnership’s income.
Can I convert a current business into a South Carolina limited partnership?
Yes, it’s possible to convert a current business into a South Carolina limited partnership, but legal counsel should be sought as to the best approach.
Are there any annual report filing requirements for South Carolina limited partnerships?
Yes, all South Carolina limited partnerships are required to file an annual report and fee by the designated deadlines.
Can a non-US corporation be a limited partner in a South Carolina limited partnership?
Yes, a non-US corporation can be a limited partner in a South Carolina limited partnership, but international taxation laws may apply.
How frequently must a South Carolina limited partnership hold meetings?
There are no specific meeting requirements for South Carolina limited partnerships unless a provision regarding meetings is included in a written partnership agreement.

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Conclusion

Starting a limited partnership in South 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.

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