Written by attorney Adam Nathaniel Williams

Steps to Establish a Limited Partnership in Washington

RCW 25.10, et seq., governs limited partnerships. One or more general partners and one or more limited partners compose a Limited Partnership. The general partners manage the business and share fully in its profits and losses. Limited partners share in the profits of the business, but their losses are limited to the extent of their investment. Limited partners usually play no role or a very limited role in the day-to-day operations of the business. All limited partnerships must file with the Washington Secretary of State.

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Advantages include this entity places a limitation on liability with respect both to potential lawsuits and money (the limited partner incurs liability only for the amount of capital it contributed to the business and a business creditor cannot come after the limited partner’s personal assets); easier to attract investors because limited partners obtain only limited liability to the business debts; profits and losses pass through the business to the partners and taxes flow to their own personal income tax returns; and limited partners share in the profits and losses without having to participate in the business itself. Disadvantages include if the limited partner becomes active in the business he or she may incur general-partner personal liability; general partner remains personally and fully liable for the debts of the business; and the limited partnership must file the Certificate of Limited Partnership with the state before the partnership comes into existence, which includes state filing fees.

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