How to Form a Limited Partnership in Texas
Q: I am trying to start a limited partnership. What do I need to do?
Thank you to a customer from Texas for that great question! A limited partnership (LP) is a business with two types of partners: general partners, who manage the business and have personal liability for business debts, and limited partners, who are passive investors without personal liability and who aren’t involved in running the business. To start a limited partnership in Texas, you will need to submit a Certificate of Formation-Limited Partnership to the Texas Secretary of State. We’ll walk you through the process.
1. Choose a business name
First, you need to choose a name for your limited partnership. According to Texas law, a limited partnership name must:
- be unique among business names in Texas.
- not include words that suggest that the LP is a different entity type, such as “LLC” or “corporation.”
- not suggest that the business is affiliated with a government agency.
We recommend doing a quick business search to make sure your business name is available.
2. Appoint a Texas registered agent
Every limited partnership in Texas needs a Texas registered agent. A registered agent is a person (or business entity) that agrees to accept legal correspondence on behalf of a business. Your registered agent must have a physical address in Texas where they can accept service of process in person during business hours. You could appoint a partner in your business for this role, another individual, or a professional registered agent service.
3. Complete your Texas Certificate of Formation
When you’re ready to officially form your limited partnership, you’ll need to file the Texas Certificate of Formation-Limited Partnership, which you can submit by mail or online. If you submit by mail, you must submit the form in duplicate. The filing fee is $750. Here’s the information you’ll need to include in your application:
- Business name
- Registered agent
- Registered office (must be a physical address, not a PO box)
- Names and addresses of all general partners
- Principal office (address where business records will be kept)
- Mailing address
- Supplemental information (if applicable)
- Effective date. (whether your business will be formed immediately or at any date up to 90 days in the future)
- Signatures of general partners
4. Create a Limited Partnership Agreement
An important step when forming a limited partnership is to create a Limited Partnership Agreement. This agreement is basically a contract between your partners, establishing the rules you agree to follow and the roles and responsibilities of the partners. While a Limited Partnership Agreement is not required to be in written form (it may be oral) or filed with a state agency, your agreement is legally binding and holds up in court. We recommend getting advice from a business lawyer when drafting your Limited Partnership Agreement.
5. Obtain an EIN from the IRS
If your limited partnership will have employees, you are required to get an EIN (Employer Identification Number) from the IRS. An EIN is basically a social security number for a business. This is the number you’ll put on your tax forms so that the IRS can identify your business.
Learn more about How to Get an EIN Number.
6. File the Texas Franchise Tax and reports
Unless exempt, limited partnerships in Texas are subject to the state’s franchise tax and must submit a tax filing each year, even if no tax is owed. A Public Information Report must be submitted as well, providing information on all general partners. The filing is free, although online filings are charged a $1 service fee.
Additionally, the state may require certain limited partnerships to file a Periodic Report “not more than once every four years.” The filing fee is $50. The Secretary of State will send a notice to your registered office if a periodic report is due.
Want to learn more about business partnerships? Check out our guide to Partnerships vs. LLCs.
