How to Form an LP in Texas
Depending on your business goals and needs, a limited partnership may be a good choice of entity. Like all business entities, an LP requires a Texas registered agent to be listed on the formation document. Lone Star Registered Agent is the best choice for registered agent, if we do say so ourselves.
What is a Texas Limited Partnership?
A limited partnership is a partnership with one or more limited partners, and one or more general partners, that has been created to conduct a for-profit-business. This means that at least one of the partners in a limited partnerships has full, personal liability for the debts and obligations of the company. This entity is referred to as the general partner and is responsible for making day-to-day decisions for the business.
The limited partner is typically an investor. This partner can be an individual, an LLC, a corporation, or another type of legal business entity. Because this partner has limited liability, it is not responsible for the debts of the partnership.
Why should I form a Texas LP?
Texas Limited Partnerships offer unique business advantages. Here are just a few pros of forming a Texas LP:
Ease of Operation
Once of the most attractive benefits of forming a limited partnership rather than an LLC or corporation is the ease of operation. Because of its unique structure with one general partner and one partners with limited liability, the general partners do not need to consult with the LP for the majority of the business decisions. This frees up time and energy for the GP to build the business, and for the LP to enhance their investing ability.
Tax Benefits
Like an LLC, an LP is a pass through entity. LPs are not subject to corporate tax, and the business itself pays no tax on its income.
Estate Planning
Limited partnerships are often used as estate planning tools. In this scenario, the general partner is the estate, and the limited partners is an heir. This reduces the taxable value of the estate while allowing the GP to maintain management over the investment.
Cons
The most obvious con associated with forming a limited partnership in Texas is the risk to the general partner who, unlike the limited partner, has full liability for the debs and obligations of the company.
Additionally, the state filing fee for forming an LP is pretty steep, at $750. In contrast, the formation fee for LLCs and corporations is $300.
Registered Agent Requirements
All legal business entities in Texas are required to have a registered agent. This includes limited partnerships. If you are forming a limited partnership in Texas, Article 3 on the Certificate of Formation requires that you provide the name and physical address of a registered agent located in Texas. A registered agent can be an individual or a legal entity. In fact, you can serve as your won registered agent if you wish. However, serving as your own registered agent requires that you have a physical address in Texas. If you don’t, you will need to hire someone to serve as your registered agent. This is one of the quality services we provide at Lone Star Registered Agent.
Who can form a Texas LP?
If you find that the pros of a limited partnership fit your business, legal, or financial needs, you and a partner can form a limited partnership in Texas.
Completing the Certificate of Formation for a Limited Partnership in Texas
The formation document to start a limited partnership in Texas is called the Certificate of Formation. This form must be completed and submitted, along with a $750 formation fee, to the Texas Secretary of State. There are four specific sections on this form. Each section is called an “article.”
Article 1 — Entity Name and Type
The name of your LP must include the word “limited” or “limited partnership.” You can also use the abbreviation “LP.” According to Subchapter C or Chapter 79 of the Texas Administrative Code, some of the words you are not allowed to use are: “Olympic,” “Olympiad,” “Citius Altius Fortius,” “bank,” “trust,” and/or “war.” This list is certainly not exhaustive so it is a good idea to check the code before getting your mind set on a certain name that may use a prohibited word.
It is also important to remember that the name of LP needs to be distinguishable from any other legal entity filed with the Texas Secretary of State.
Article 2 — Registered Agent and Registered Office
Article 2 of the Certificate of Formation is the section allotted for your registered agent information. In this section, you are required to provide the name and physical street address or your registered agent. A registered agent is a third-party entity that is responsible for receiving all legal correspondence from the Texas Secretary of State on behalf of your business. This is important because it provides a consistent liaison between the state and your business. All legal entities are required to provide this information as part of their formation.
You can be your own registered agent, or your can hire a person or entity to serve as one for you. Whatever option you choose, the responsibilities of your registered agent are the same: to receive legal correspondence for your company.
Article 3 — Governing Authority
This section is where you list the name and address of each general partner. Texas Limited Partnerships are required to list at least one general partner on this document. If the GP is an individual, list their legal name without prefixes. If the GP is an entity, provide the legal name of the entity.
You are not required to provide the name and address of the limited partner.
Article 4 — Principal Office
The principal office is the physical location where the official business paperwork of the LP is kept and made available. Unlike the registered agent office, it is not require that this address be in Texas.
In addition to the four articles this is section for any supplemental provisions or information, the start date of the LP, and the signature of any general partners listed.
Once this statement is complete, the next step is filing the document with the Texas Secretary of State.
How much does it cost to form a Texas LP?
The filing fee to submit the Certificate of Formation is $750. You can pay this fee with a check, money order, or major credit card. There is a 2.7% convenience fee for payments made with a credit/debit card.
How to File the Certificate of Formation
Once you have completed the Certificate of Formation, you can submit it to the Secretary of State via mail, fax, in person, or online.
Mail
To submit your document via mail, include the original Certificate of Formation, along with a copy and the filing fee to:
P.O. Box 13697
Austin, Texas 78711-3697
You can pay with check or money order, but do not include cash in the mailing.
Fax
You can fax your Certificate of Formation to (512) 463-5709. In order for the Certificate of Formation to be accepted, you must also include your credit card information for manual processing.
In Person
To file in person, bring your documents and necessary payment to the James Early Rudder Office Building, 1019 Brazos, Austin, Texas 78701.
Online
You can also file your Certificate of Formation through the SOSDirect Portal. You are required to create a free online account. If you are seeking to form a new-veteran owned business, do not use the online method as you will not be able to submit the documents necessary for your filing fee to be waived.
How long does it take for my Certificate of Formation to be filed?
The Secretary of State takes between 5-7 business days to file your Certificate of Formation. However, expedited service is available for $25 per document. Expedited filings are typically processed by the end of business of day following the day they are submitted.
Do I have to file a BOI report for my Limited Partnership in Texas?
Chances are, yes. Just like LLCs and corporations, most LPs formed in the U.S. are required to file a BOI starting January 1, 2024. You’ll have 90 days to file your report if your LP is formed in 2024, after that you’ll have 30 days. If your LP was formed prior to January 1, 2024, you have until the start of 2025 to file your initial BOI report. This report must be filed with the Financial Crimes Enforcement Network (FinCEN), and requires the following information:
- Name of company (including any DBA names)
- EIN or similar tax ID
- Address and jurisdiction of formation
- Full legal name of beneficial owners and company applicants
- Date of birth of beneficial owners and company applicants
- Residential address of beneficial owners and company applicants
- Copy of beneficial owners and company applicants’ photo ID
A beneficial owner is someone with a controlling stake in your company, like a partner or someone who owns at least 25% of your LP. Your company applicant is the person who filed to create the company (and the person behind the creation, if applicable). This report is free to file, and will NOT be made public.
HINT: If you don’t want to have to worry about it, hire us! We’ll file your BOI report for you for only $25.
Does my Texas LP need to file a Public Information Report?
Yes, Texas LPs need to file a Public Information Report with the Texas Comptroller every year. The deadline is May 15, and there’s no filing fee.
Does my LP have to pay Texas franchise tax?
Only if it grosses over $2.47 million in annual revenue. For more information on the franchise tax, take a look at our Texas franchise tax guide.