In the Commonwealth of Virginia, a Partnership is organized under Virginia Statutes §50-73.79 et seq. for Partnerships (the “Virginia Uniform Partnership Act”) and §50-73.1 et seq. for Limited Partnerships (the “Virginia Revised Uniform Limited Partnership Act”). Today, however, with the introduction of the more popular and fluid Limited Liability Company, Partnerships have lost most of their allure and are not as often the best choice when selecting a business entity.
The next step after your Certificate has been approved by the appropriate state agency is to have a skilled business attorney draft the highly recommended Partnership Agreement between the partners which describes in detail such consideration as the structure and governance of the company, how the company is operated, partner disputes, succession plans, and dissolution procedures.
The Partnership is a separate entity unto itself. Deriving its authority from both common law (de facto partnership) and state statutes, the Partnership is a traditional business entity controlled and operated by two or more persons with the common interest to transact business together for profit. It has the power to do things that an individual can do, such as purchase land and enter into contracts, and even has its own federal identification number, similar to an individual having a social security number. There are two main, distinctive types of Partnerships, General Partnerships (GP) and Limited Partnerships (LP). In General Partnerships, the partners typically share in not only the profits of the Partnership but also its debts and obligations. In a LP, there are two types of partners, a ‘general partner’ and ‘limited partner(s)’. The general partner in a LP, which can be an entity, takes on the debts and liabilities of the Partnership while the limited partner(s) are only liable for up to their initial contribution (investment) into the LP.
Consequently, LPs are generally more advantageous to form over a GP as it allows the majority of its partners to receive the benefit of liability protection, allowing its limited partners the ability to shield their personal assets and, in most circumstances, from business creditors and individuals (or other business entities) who seek remedies stemming from the negligence or wrongdoings of the Partnership. This protection, however, may be pierced (“Piercing the Veil”) if the Limited Partnership does not take the necessary steps to ensure that the entity is separate from its limited partners and that the general partner, if an entity, is adequately capitalized. Consequently, it is important to speak to a skilled business attorney who can advise you on how to maintain your company’s liability protection.
After your Partnership Agreement has been drafted, approved, and signed by all partners, it is important register for an Employer Identification Number (EIN), also known as a Federal Tax Identification Number, with the Internal Revenue Service. A skilled business attorney, or tax attorney, can file an EIN on your LLC’s behalf by having you sign a Form SS-4 authorizing the attorney as a Third Party Designee to act on your behalf. The EIN will not only be used for tax purposes but to open bank accounts in the Partnership’s name as well as for employee considerations. It is also important to note that if your Certificate of Limited Partnership was filed in the Commonwealth of Virginia you should register your organization with the Virginia Department of Taxation.