The US Limited Partnership (LP) at a glance

The American Limited Partnership, or LP for short, is a partnership. It works much like a European limited partnership, with the same basic function and structure.

An LP is made up of a General Partner, who runs the business and is liable with their own assets, and the Limited Partners, whose liability is capped at their capital contribution.

1Forming the company

You can form a Limited Partnership in any US state. Which state suits your plans best should come down mainly to practical questions about where your business will operate (closeness to potential staff, customers and so on).

1.1Applicable corporate law

As across the English-speaking world, the US follows common law. Company law is a matter for the states and varies from one to the next, but the fundamentals are the same.

1.2Time to form

How long formation takes differs from state to state. Anywhere from two days to two weeks is normal.

1.3Formation fees

Formation fees also vary widely between states. Fees of $50 to $500 are typical.

2Officers and directors

An LP has the following roles:

• General Partner: fully liable, manages the business
• Limited Partners: liability limited to their contribution

As a rule, only the General Partner manages the partnership's business. The Limited Partners are not involved unless they are granted authority to act on its behalf.

3Share capital & shareholders

A Limited Partnership has no statutory minimum capital. How each partner holds their stake in the LP and how profits are split between them is purely a private agreement.

4Liability

The liability rules are comparable to those of European limited partnerships. It is not the LP that is liable but the people involved. The General Partner is liable with all their assets, while the Limited Partners are liable only up to their contribution, not with their personal assets.

4.1The Partnership Agreement

The partners can draw up a partnership agreement. In most states this Partnership Agreement is not legally required for an LP; the LP statutes of Delaware and California, for example, even allow oral or implied agreements. Only New York expressly requires a written agreement by law (§ 121-110 Revised Limited Partnership Act). Still, a written agreement is strongly recommended in every state. The Partnership Agreement is never made public.

5Public record with the state

Each state keeps its own business register, and you can search them online. Exactly what is made public varies from state to state.

Usually the General Partner's details are published. Details of the Limited Partners do not appear in any state register.

5.1Ongoing state filings (annual report)

Most states require an annual report, but not all of them (Ohio, for example, has none). The annual report is not a tax return. It is simply a filing with the state register confirming the company details on record (registered address, management, business purpose and so on).

Some states ask for a report every two years instead of every year. Preparing and filing the annual report is included in our annual fee; state fees are charged on top.

5.2Annual state fees

Annual fees also differ from state to state. Some states only charge a fee when you file the annual report. Others also levy a flat franchise tax.

6Taxation

The LP is tax transparent. That means taxation happens at the level of the partners, not the partnership. In the US the tax burden is around 25 - 35%, including any state tax, depending on profit and industry. Every partner has to file a US tax return.

As a rule, no further tax is due in your country of residence, although this depends largely on the tax treaty between that country and the US.

The LP must withhold 37% tax on distributions. Partners get back any overpaid tax once they file their US income tax return.

Go deeper with our pages on taxation of the US LP, uses of the LP and our General Partner and authorized signatory service; every formation route is covered under US Company Formation.

In short

• The LP is a partnership and works much like a European limited partnership in function and structure.
• The General Partner runs the business and is fully liable; the Limited Partners are liable only up to their contribution.
• Only New York expressly requires a written Partnership Agreement, but one is recommended in every state.
• The LP is tax transparent; the US tax burden is around 25 to 35 percent, and the LP withholds 37 percent on distributions.

How we help you

• Form a Limited PartnershipThe US LP for structures with a general partner and limited partners.
• LLC and LP Tax ReturnForm 1065 and K-1 for your LLC or LP.
• Apply for an EINYour company's US tax ID, applied for by us.
• Tax structureA clean structure between parent company and US subsidiary, or between you and your US company, coordinated with your accountant.
• Company formation consultationEntity type, state and tax consequences, before you commit.