In this article, our experienced Illinois business attorneys explain how to form a limited partnership in Illinois. We address the following:
- What is a limited partnership in Illinois?
- What are limited partnerships used for in Illinois?
- What are the requirements for a limited partnership in Illinois?
- What paperwork is needed to form a limited partnership in Illinois?
- Benefits and disadvantages of limited partnerships in Illinois
What is a limited partnership in Illinois?
Partnerships are a common formed business structure in Illinois. The main difference between a limited partnership and a general partnership is that it allows for both limited and general partners. While a limited partner invests in the company, a general partner oversees day to day operations.
What are limited partnerships used for in Illinois?
Because of the risks a limited partnership can pose to its general partners, the entity is not recommended for long standing businesses. Instead, limited partnerships are great for short-term projects, like family estate planning and film production. They’re often used for raising investments where limited partners act more like stockholders.
What are the requirements for a limited partnership in Illinois?
The requirements for a limited partnership in Illinois are as follows:
- Must have at least one general partner and at least one limited partner
- Must have a physical address within Illinois (no P.O. boxes)
- Registered business name with the state (if anything other than partners’ surnames)
- Designated business entity by putting LP after its name
- Designated registered agent, a physically present person in Illinois who is authorized to accept important documents on behalf of the partnership
What paperwork is needed to form a limited partnership in Illinois?
To create a limited partnership in Illinois, a Certificate of Limited Partnership needs to be filed with the Secretary of State. Before it can be filed, the Certificate of Limited Partnership must include:
- Partnership name
- Physical address of the business
- Name and address of registered agent
- Purpose of limited partnership
- Agreed upon distribution and termination rights
- Signatures of all general partners
A partnership agreement should also be drafted. This defines the rights and responsibilities of all involved parties. This agreement can help prevent litigation down the road should a dispute occur.
Benefits and disadvantages of limited partnerships in Illinois
In Illinois, the main benefit of a limited partnership is that it does not have to file taxes. Instead, its income is passed through to its partners where it is reported on an individual level.
Limited partners enjoy other benefits of limited partnerships in Illinois. Limited partners are not personally liable for business debts or other financial obligations. Should a limited partnership file for bankruptcy in Illinois, a limited partner’s assets cannot be collected. The one disadvantage of being a limited partner in this type of partnership is having minimal influence on business management and protocols.
General partners enjoy running a business in a limited partnership without investing much of their own finances. But they can be held personally liable for business debts and legal judgments.
.avif)
.svg){kind=small}
