Form a Nevada Limited Partnership

We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.

What Is a Nevada Limited Partnership?

There are several significant differences between the general partnership and the limited partnership (LP), starting with the roles of the partners themselves. With a general partnership, the partners split profits evenly and take equal responsibility when it comes to liability ― general partners are personally liable for the company’s debts and settlements.

With a limited partnership (not to be confused with the LLC), there is at least one general partner and one limited partner, which is the term for a partner that does not have managerial responsibilities, and their liability is limited to the amount of money they invested in the partnership.

Sometimes, you’ll hear limited partners referred to as “silent partners” due to their lack of direct involvement in the day-to-day operations of the company.

Another major difference is that the general partnership is not a formal business structure, which means you don’t even need to file formation documents with the state of Nevada, or pay any sort of formation fee. The general partnership is simply formed when the partners begin transacting business together.

On the other hand, a limited partnership does have a formal formation process with the Nevada state government, and there is also a formation fee involved.

How to Form a Nevada Limited Partnership (in 6 Steps)

Step One: Choose an LP Name

Whereas the state of Nevada allows general partnerships to operate under the individual names of the partners, that is not the case for limited partnerships, which must have a distinct business name.

Your limited partnership’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:

Legalities

First of all, your business name must follow Nevada’s requirements for LP titles: the business name may not contain any of the limited partner’s names, and it may not include anything that implies that the organization was formed for any purpose other than the purpose stated in the certificate of formation. Additionally, the name must contain the words “Limited Partnership,” or an abbreviation such as “L.P.” or “LP”. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).

Explanatory Naming

Another aspect to consider is including language that explains what your business does ― for example, if you’re a realtor, put the phrase “real estate” in your LP name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”

Do You Like It?

At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your limited partnership’s name both sounds good when spoken out loud, and looks good when written down.

The most important consideration for naming an LP is to not get too attached to any one business name until you have either reserved the name with the state of Nevada, or you’ve officially formed your business.

If you’ve found an available name that appeals to you, you may reserve it for up to 90 days by submitting a Name Reservation Request form to the office of the Secretary of State. The filing fee to submit the document is $25.00.

Step Two: Designate a Registered Agent

Every limited partnership in Nevada is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.

According to the Nevada Secretary of State,

Persons wishing to file a Certificate of Limited Partnership in the State of Nevada must designate a person as a registered agent who resides or is located in this state. Every registered agent must have a street address in the state of Nevada for the service of process, and may have a separate Nevada mailing address such as a post office box, which may be different from the street address.”

Without a registered agent in Nevada, you could lose your good standing and the state also has the right to dissolve your LP if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.

Our Recommendation

At the end of the day, we recommend designating a registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.

Step Three: File the Certificate of Limited Partnership

At this point, it’s time to legally form your new limited partnership.

In order to establish it, you are required to complete a form known as the Certificate of Limited Partnership and file it with the Nevada Secretary of State. The document is relatively short and straightforward in nature and must be accompanied with a Registered Agent Acceptance form which is included in the document file. The Certificate of Limited Partnership will require the following information:

• The name of the Limited Partnership
• The Limited Partnerships Nevada street address
• The name and address of the noncommercial registered agent OR the name of the commercial registered agent
• The dissolution date
• The name and business address of each individual general partner
• The name, business address and signature of each organizer
• The authorized signature of the newly designated registered agent

You may submit the Certificate of Limited Partnership document by completing it here as a PDF file and mailing it to the Nevada Secretary of state, or you may choose to file the document online by registering with SilverFlume, Nevada’s online filing portal.

Cost to Form an LP: The state of Nevada charges a filing fee of $40 to form a limited partnership.

Processing Time: The Nevada Secretary of State lists no concrete processing times for the Certificate of Limited Partnership document. Processing time will likely depend on the time of year. Should you decide to expedite the processing, you may do so for an additional fee.

Step Four: Create a Limited Partnership Agreement

While not legally required by the state of Nevada, a limited partnership agreement outlines some of the key operating principles of the business. Even though you don’t have to submit it to the state to form your LP, it’s still a vital document that describes the exact nature of the agreement between the general partners and limited partners.

The information included in a limited partnership agreement does vary depending on the nature of your business, the size of your company, and some other variables. In general, it’s good to get the following information down in writing:

• The term (in years) of your partnership
• Identities and roles of general and limited partners
• Initial capitalization and ongoing capital contributions
• Allocation of profits/losses
• Management structure
• Voting rights and meeting plans
• Accounting and record-keeping practices
• Conditions for transfer and dissolution

Step Five: Handle Taxation Requirements

Federal Requirements

Limited partnerships require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LP functions.

For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LP for free through the IRS.

State Requirements

Although Nevada limited partnerships never have to pay a corporate income tax, they may be subject to other specific state taxes. Often, these taxes are industry-specific and are determined by what kind of goods or services your LP provides.

Thankfully, it’s easy to discover which taxes are necessary using SilverFlume, Nevada’s business platform. After registering with the system, you will be able to see which taxes you owe and how to pay them.

Local Requirements

Depending on where in Nevada your business is located, you may also need to pay local taxes.

It’s likely that your company will own some type of local tax, whether it be use tax or sales tax. To determine which local taxes your LP is subject to, you’ll want to register on SilverFlume, Nevada’s business platform. For a full list of Nevada counties and their standard/example tax rates, refer to the Sales and Use Tax Publications page of the Department of Taxation’s website.

Step Six: Obtain Business Licenses and Permits

When it comes to licenses and permits, the first thing your Nevada LP will need is a Nevada state business license. This license costs $200 and can be obtained by making an account with Nevada’s business filing platform here.

On top of the standard business license, you may also need to obtain other industry-specific licenses. Information on all necessary state licenses can also easily be found using SilverFlume, Nevada’s business filing platform.

In addition to state licenses, it is sometimes necessary to obtain location-specific licenses and permits. To be sure you have met all the licensing requirements for your county, you’ll want to check this list of local licensing requirements which has been compiled by the State of Nevada’s Department of Business and Industry.

Would You Prefer a Professional Form Your LP?

If you would rather have a professional take care of your formation paperwork for you, you have a couple of options. The less expensive choice is to hire a business formation service to create your limited partnership.

While some service providers stick to less complicated business entities like limited liability companies, some also provide LP formations ― namely, LegalZoom and BizFilings. Currently ZenBusiness does not have this offering but does have regular LLC formation and business incorporation.

If you want the maximum possible degree of expertise, you should also consider hiring a business attorney to form your limited partnership. This is certainly a more expensive route, but if you want the peace of mind that every step is completed correctly ― and that all of your options have been thoroughly explored ― hiring a lawyer is a great option.

Next Steps: What to Do After Creating a Nevada LP

Open a business bank account

We highly recommend that you establish a business bank account so that your business and personal finances are maintained separately. This is important because it helps protect your personal assets, and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.

Business insurance

If your LP has any number of employees, it will be required by Nevada law to carry both unemployment insurance (sometimes referred to as UI) as well as workers’ compensation coverage. To get more information on the policies regarding these insurance types, check out the information page on unemployment insurance and the workers’ comp section of the Nevada Department of Industrial Relations website. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.

Income reporting

Limited partnerships do not file business tax returns. Instead, the income is passed through the business entity to the partners, who then claim their share of profits or losses on their personal tax returns. Still, LPs do need to file an annual information return with the IRS, in which you report your business income, deductions, gains, and losses for the year.

Annual reporting

Nevada LPs are not required to file an annual report, but they must submit an updated Annual List of General Business Partners with the Nevada Secretary of State by the end of the anniversary month in which the business was originally formed. This can be done either by completing the document as a PDF form and mailing it, or completing and submitting it online through the Nevada Secretary of State’s SilverFlume system.

Accounting

We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.