The limited partnership is a business entity created by two or more owners to engage in business. There must be at least one general partner and one limited partner. The general partner manages the partnership, and is generally liable for the debts of the partnership.
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Formation
Limited partnerships are formed by two or more individual owners associating to carry on a business for profit, and filing a certificate of limited partnership and affidavit of capital contributions. It would be a big mistake for two or more individuals to go into business together as partners without a written partnership agreement.
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Assets
Assets are typically owned by the limited partnership and deployed in the business venture. Problems can arise when business assets are not properly designated as being owned or not being owned by the partnership. Care needs to be given to each asset used by the business to make clear who owns the particular asset in question.
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Liabilities
Liabilities, such as for office supplies and the like, are generally owed by the limited partnership. In the event the limited partnership shall fail, the general partners are typically responsible for the unpaid debts of the business, and the limited partners are typically not responsible for any unpaid debts.
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Fictitious Name
A limited partnership is operated under the name of the limited partnership. The owners may wish to use a business name different from the name of the limited partnership, and may protect the use of the business name by making a fictitious name filing with the Florida Secretary of State.
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Taxation
A new limited partnership can generally be created, and assets transferred to it, in a tax free transaction. The profits and losses from the operations of a limited partnership are reported on IRS Form 1065 for federal income tax purposes. The separate share of each partner is reflected on the Schedule K-1s to the partnership’s tax return. The separate share is then reported on each of the partner’s individual income tax return (Typically IRS Form 1040). The limited partnership must keep separate books and records for the partnership’s financial activities. The State of Florida does not impose an income tax on the profits or losses of a limited partnership. The partners report and pay their respective shares of partnership profit and losses. If there is a corporate partner, the partnership must file an information return with the Florida Department of Revenue (Form F-1065).
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