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

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Start a Limited Partnership in Tennessee

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

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

Steps in Starting a Limited Partnership in Tennessee

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 Tennessee. 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 Tennessee

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

Step 1: Research and Preparation

Before starting a limited partnership in Tennessee, 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 Tennessee.

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

Naming requirements for a Limited Partnership in Tennessee 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 Tennessee.

If the limited partnership name is available, you may choose to reserve it for a specific period of 4 months by filing a name reservation application and paying the online name reservation fee of $20 and mail name reservation fee of $20. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name. 

The DBA filing can be done by two methods, by mail and in person., which costs around Varies by county. In addition, the DBA’s validity in Tennessee is five years, which you can file in Tennessee Secretary of State.

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

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

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 Tennessee laws and regulations, it’s advisable to seek legal advice from a Business Attorney in Tennessee 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 Tennessee government. This process typically involves filing a Certificate of Limited Partnership with the Tennessee 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 Tennessee 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 Tennessee government, you’ll need to obtain Tennessee 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 –

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Register For Tennessee Taxes

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

Step 5: Complying With Additional Tennessee Requirements

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

File Annual Reports 

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

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

  • 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 Tennessee, 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 Tennessee?

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

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

Can a limited partnership be formed in Tennessee?
Yes, a limited partnership can be formed in Tennessee.
What is a limited partnership?
A limited partnership is a type of business entity where there are general partners who run the business and limited partners who invest in the business but do not have control.
Is there a minimum number of partners required to form a limited partnership in Tennessee?
Yes, Tennessee requires at least one general partner and one limited partner to form a limited partnership.
What are the requirements for becoming a general partner in a limited partnership in Tennessee?
There are no formal requirements to becoming a general partner in Tennessee.
Are there any filing requirements to form a limited partnership in Tennessee?
Yes, a Certificate of Limited Partnership must be filed with the Tennessee Secretary of State’s office.
Can an attorney assist in the formation of a limited partnership in Tennessee?
Yes, an attorney can assist in the formation of a limited partnership in Tennessee.
What is the liability of limited partners in a limited partnership in Tennessee?
Limited partners have limited liability for the debts and obligations of the business.
What is the liability of general partners in a limited partnership in Tennessee?
General partners have unlimited personal liability for the debts and obligations of the business.
What are the tax implications of forming a limited partnership in Tennessee?
Tennessee does not have a state income tax, so there may be fewer tax implications as compared to other states.
What is the role of a limited partner in a limited partnership in Tennessee?
A limited partner invests in the business but does not have a role in managing the business.
Can a limited partner also be a general partner in a limited partnership in Tennessee?
No, a limited partner cannot be a general partner in the same limited partnership under Tennessee law.
How is a limited partnership taxed in Tennessee?
Limited partnerships are not subject to the Tennessee franchise and excise tax.
Are there any annual reporting requirements for a limited partnership in Tennessee?
Yes, an annual report must be filed with the Tennessee Secretary of State’s office.
How much does it cost to file a Certificate of Limited Partnership in Tennessee?
The fee to file a Certificate of Limited Partnership is $600.
What is required to maintain a legal limited partnership status in Tennessee?
Limited partnerships in Tennessee must maintain compliance with state laws and filings with the Secretary of State.
Do limited partnerships in Tennessee need to have an operating agreement?
While not required by law, it is recommended that limited partnerships have an operating agreement which outlines the terms of the partnership.
How is a Tennessee limited partnership dissolved?
A Tennessee limited partnership is dissolved according to the terms of the partnership agreement or by a vote of the partners.
What is the duration of a limited partnership in Tennessee?
A limited partnership in Tennessee can have a specific duration in its agreement or can be perpetual.
Who is responsible for managing the day-to-day operations of a limited partnership in Tennessee?
That responsibility generally falls to the general partner in the partnership.
Can a limited partnership offer ownership interests to investors in Tennessee?
Yes, a limited partnership can offer ownership interests to investors in Tennessee.
Can a limited partnership in Tennessee have more than one general partner?
Yes, a limited partnership in Tennessee can have more than one general partner.
Can a spouse be a partner in a Tennessee limited partnership?
Yes, a spouse can be a partner in a limited partnership in Tennessee.
What if the limited partner becomes actively involved with managing the business?
If a limited partner becomes actively involved with managing the business, they could lose their limited liability status.
What is the difference between a limited partnership and a limited liability partnership in Tennessee?
A limited partnership has both general partners and limited partners, while a limited liability partnership has only partners with limited liability.
Can a limited partner make decisions in the operation of the business for a Tennessee limited partnership?
No, limited partners cannot make decisions in the operation of the business for a limited partnership in Tennessee.
How can a limited partner protect their investment in a Tennessee limited partnership?
Limited partners can protect their investment by limiting their involvement in the day-to-day operations of the business.
Can a limited partner transfer their ownership interest in a Tennessee limited partnership?
Yes, with certain conditions according to the limited partnership agreement, a limited partner can transfer their ownership interest in a Tennessee limited partnership.
Can an out-of-state individual or company form a limited partnership in Tennessee?
Yes, an out-of-state individual or company can form a limited partnership in Tennessee.
Can a limited partner participate in the profits of a Tennessee limited partnership?
Yes, limited partners can receive a share of the profits as outlined by the limited partnership agreement.
What is a limited partnership in Tennessee?
A limited partnership in Tennessee is a business structure where partners share in the profits and management responsibilities, but some partners have limited liability.
How many partners are required to form a limited partnership in Tennessee?
At least one general partner and one limited partner are required to form a limited partnership in Tennessee.
What is the process for creating a limited partnership in Tennessee?
To create a limited partnership in Tennessee, you must file a certificate of limited partnership with the Secretary of State and obtain any necessary licenses or permits.
Can a limited partnership in Tennessee be formed by just individuals or can a corporation be formed as well?
Yes, a corporation can be a general partner or a limited partner in a limited partnership in Tennessee.
How does the limited liability work for partners in a limited partnership in Tennessee?
Limited partners in a limited partnership in Tennessee are not personally responsible for the partnership’s debts and obligations beyond the amount they have invested.
Can a limited partner in Tennessee be involved in the management of the limited partnership?
A limited partner in Tennessee can be involved in the management of the limited partnership but risks losing their limited liability protection if they take on too much management responsibility.
What duties does a general partner have in a limited partnership in Tennessee?
General partners in a limited partnership in Tennessee have a duty to act with loyalty to the partnership and its partners, and a duty of care in managing the business.
How are profits distributed among partners in a limited partnership in Tennessee?
Profits are distributed among partners in a limited partnership in Tennessee based on the terms of the partnership agreement.
What is a registered agent in Tennessee and why is it necessary?
A registered agent in Tennessee is a designated person or entity that is responsible for receiving legal notices and important documents. It is necessary for every business entity to have one.
Is a limited partnership in Tennessee required to file an annual report?
Yes, a limited partnership in Tennessee is required to file an annual report with the Secretary of State that includes current contact information for the partners and registered agent.
Can a limited partnership in Tennessee do business outside of the state?
Yes, a limited partnership in Tennessee can do business outside of the state but must comply with the laws of each state where they do business.
Does a limited partnership in Tennessee need a business license to operate?
Yes, most limited partnerships in Tennessee are required to have a business license to operate.
Can a creditor go after the personal assets of a limited partner in Tennessee if the partnership is unable to pay its debts?
No, a creditor cannot go after the personal assets of a limited partner in Tennessee if the partnership is unable to pay its debts.
Is there a maximum number of partners allowed in a limited partnership in Tennessee?
There is no maximum number of partners allowed in a limited partnership in Tennessee.
Can a limited partnership in Tennessee conduct charitable activities?
Yes, a limited partnership in Tennessee can conduct charitable activities but must comply with state and federal regulations.
Is a limited partnership in Tennessee required to disclose its financial information to the public?
A limited partnership in Tennessee is not required to disclose its financial information to the public.
Can a limited partnership in Tennessee be converted into another type of entity?
Yes, a limited partnership in Tennessee can be converted into another type of entity if the partnership agreement allows for it.
Is there a state filing fee for creating a limited partnership in Tennessee?
Yes, there is a state filing fee for creating a limited partnership in Tennessee.
What is a business tax registration in Tennessee and is it necessary for a limited partnership?
A business tax registration in Tennessee is a process to register with the Department of Revenue for tax-related purposes. Most limited partnerships in Tennessee are required to do this.
Can the limited partnership agreement be changed after it has been filed with the Secretary of State in Tennessee?
Yes, the limited partnership agreement in Tennessee can be amended after it has been filed with the Secretary of State if the amendment is in compliance with the state laws.
Is there a residency requirement for partners in a limited partnership in Tennessee?
There is no residency requirement for partners in a limited partnership in Tennessee.
Can non-profit organizations form a limited partnership in Tennessee?
Yes, non-profit organizations can form a limited partnership in Tennessee but must comply with state and federal regulations for non-profits.
What are the reporting requirements for a limited partnership in Tennessee?
The reporting requirements for a limited partnership in Tennessee include an annual report and other filings as required by state or federal law.
Is a limited partnership in Tennessee required to have a physical office?
No, a physical office is not required for a limited partnership in Tennessee but there must be an agent for service of process with a physical address.
How long does it take to create a limited partnership in Tennessee?
The time it takes to create a limited partnership in Tennessee depends on factors such as processing times and the completeness of the application but can take several weeks.
What is a foreign entity in Tennessee?
A foreign entity in Tennessee is an entity that is organized in another state or country but conducting business within Tennessee.
Can a foreign entity form a limited partnership in Tennessee?
Yes, a foreign entity can form a limited partnership in Tennessee but must comply with state and federal regulations.
Are online filing options available for creating a limited partnership in Tennessee?
Yes, online filing options are available for creating a limited partnership in Tennessee.

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Conclusion

Starting a limited partnership in Tennessee 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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