Starting a Limited Partnership in Tennessee 2024: A Detailed How-To

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How to Start a Limited Partnership in Tennessee

Ready to launch a limited partnership in Tennessee? Discover the benefits and opportunities Tennessee offers for entrepreneurs. Get step-by-step guidance on starting your limited partnership in Tennessee, ensuring a well-informed decision.

In Tennessee’s thriving, business-friendly environment, understanding the ins and outs of limited partnerships is key for successful setup and compliance. Let LLCBase ease the process as you venture into your exciting new business. Learn the advantages and details of starting a business in Tennessee today.

Start a Limited Partnership

What is a Limited Partnership

A Limited Partnership is a unique type of business structure that consists of one or more general partners, who manage the business and assume full liability, and one or more limited partners, who invest capital but have limited liability based on their investment. Just like when starting an LLC in Tennessee, a limited partnership structure provides the benefits of partnership taxation while protecting limited partners from personal liability for the business’s debts and obligations.

Why Start a Limited Partnership in Tennessee

Starting a Limited Partnership in Tennessee can provide a variety of benefits for your business, including:

  • Limited liability for limited partners: This protects the personal assets of limited partners from the business’s debts and obligations, making it an attractive option for investors.
  • Pass-through taxation: Limited Partnerships are not subject to federal income tax, and profits and losses are passed through to the partners, who report them on their individual tax returns.
  • Flexibility in management: General partners can manage the business as they see fit, without interference from limited partners, who have minimal control over day-to-day operations.

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8 Steps to Start a Limited Partnership in Tennessee

Here are the essential steps when starting a limited partnership in Tennessee that you should know:

Step 1: Choose a Name

Choosing a name for your limited partnership in Tennessee is crucial, as it helps set the tone for your business and ensures it complies with Tennessee’s naming requirements. To check the availability of your desired name, use the Tennessee Secretary of State Business Information Search. Sometimes, you may also need to reserve the chosen name for a certain period, typically 4 months. This reservation process comes with a fee, which is $20 for online submissions and $20 for mail submissions.

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Step 2: Appoint a Reliable Registered Agent

Registered Agent is a crucial part of your Limited Partnership, as they are responsible for receiving legal and tax documents for your business. In Tennessee, selecting the best registered agent in Tennessee who can efficiently manage these responsibilities and keep your business in compliance with state regulations is essential.

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Step 3: Create a Comprehensive Partnership Agreement

A well-drafted partnership agreement is essential for the smooth operation of your Limited Partnership. This document outlines each partner’s rights, responsibilities, and contributions, ensuring everyone is on the same page. While only legally required in some states, having a written agreement can help avoid misunderstandings and disputes among partners. Take the time to craft a detailed and clearly defined partnership agreement that covers all aspects of your business, ensuring a harmonious working relationship among all parties involved.

Step 4: File Your Certificate of Limited Partnership

You must file a Certificate of Limited Partnership with the Charter for Profit Corporation office to officially establish your Limited Partnership. This process involves submitting the necessary documents and paying the $300 formation fee. Depending on your preference and Tennessee’s available options, you can choose between Create an account/Log in to the SOS site, get the e-form, fill it, and submit online. Or get the online PDF, fill it up and upload it back on the site. or Send the form by mail to or drop it off in person at Corporate Filings, 312 Rosa L. Parks Avenue, 6th Floor, William R. Snodgrass Tower, Nashville, Tennessee 37243 methods for submitting your paperwork. Additionally, there might be an extra $100 for online and by mail filing fee for obtaining Certificate of Existence, which serves as proof of your Limited Partnership’s legal status and formation.

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Step 5: Obtain the Licenses and Permits

To operate your Limited Partnership legally, you must research and acquire any required permits or licenses from the Tennessee Secretary of State. These requirements may vary depending on your business’s industry, location, and specific activities. Ensure you have all the necessary licenses and permits before commencing business operations to avoid legal complications or penalties.

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Step 6: Checkout the Regulatory Requirements

In addition to licenses and permits, your Limited Partnership might need to comply with other regulatory requirements from the Tennessee Department of Labor and Workforce Development and other relevant agencies. Depending on your business’s nature and size, these requirements may include workers’ compensation insurance, employment taxes, or safety regulations. Ensure you stay up-to-date with any changes in these regulations and maintain compliance to ensure the ongoing success of your Limited Partnership.

Step 7: Secure Your EIN

An Employer Identification Number (EIN) is a unique identification number the Internal Revenue Service (IRS) assigns to your business for tax purposes. To apply for your EIN, visit the IRS website and complete the online application process. Obtaining an EIN in Tennessee is essential for filing taxes, opening a business bank account, and handling other financial and legal matters related to your Limited Partnership.

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Step 8: Register for Taxes

To ensure your Limited Partnership remains in compliance with Tennessee tax laws, you must register your business with the Tennessee Department of Revenue. This process involves filing the appropriate Tax Exemption Form to establish your business’s tax accounts, including income tax and sales tax in Tennessee. Proper registration with the Tennessee Department of Revenue is crucial for avoiding penalties and ensuring your business operates legally and responsibly within Tennessee.

Cost to Start a Limited Partnership in Tennessee

Knowing the associated costs is important when setting up a Limited Partnership in Tennessee. The following fees are typically involved in the formation process:

  • Articles of Organization fee: $300 is required for filing the Certificate of Limited Partnership, which is essential for officially establishing your business with the Charter for Profit Corporation office.
  • Name Reservation fee: Reserving your business name may include a fee depending on your preferred method. If you choose to reserve your name online, the fee is $20, while reserving through mail costs $20. Remember that name reservation might be optional or required, depending on the specific rules of Tennessee.
  • Charter for Profit Corporation fee: To obtain the Certificate of Existence, an additional fee of $100 for online and by mail filing may apply. This document proves your Limited Partnership’s legal status and formation.

By understanding the costs of starting a Limited Partnership in Tennessee, you can better plan your budget and ensure a smooth formation process for your business. Additional costs may include professional fees, licensing fees, and initial capital investments.

Advantages of Starting Tennessee Limited Partnership

If you are still thinking of starting a limited partnership, you might want to start it now because of the following advantages you won’t want to miss!

  • Tax benefits: Tennessee offers favorable tax rates to help your business save money. With 6.50% income tax rate and 7.00% sales tax rate, your Limited Partnership can benefit from lower costs and increased profitability.
  • Business-friendly environment: Tennessee is known for its supportive business climate, with numerous resources available to help entrepreneurs succeed. From access to financing options and business support services to a well-developed infrastructure, Tennessee offers a conducive environment for your Limited Partnership to thrive.
  • Access to a diverse market: Tennessee’s robust economy and diverse population allow businesses to tap into various industries and customer segments. With a wide range of potential clients and customers, your Limited Partnership can cater to different needs and preferences, increasing its chances of success.

Now that you know the benefits of starting a Limited Partnership in Tennessee, let’s delve into the step-by-step process of setting it up.

Tips for Starting a Limited Partnership

LLCBase understands that starting a limited partnership will not be so easy, so here are the tips for you!

  • Seek Professional Guidance: To ensure your Limited Partnership is structured correctly and complies with all applicable laws and regulations, consult an attorney or accountant. These experts can provide valuable advice and help you navigate the intricacies of setting up your business for long-term success.
  • Craft a Robust Business Plan: A solid business plan is the foundation of any successful venture. It guides your decision-making, helps secure financing, and attracts potential investors. Spend time developing a comprehensive business plan that outlines your goals, strategies, market research, and financial projections to set your Limited Partnership on the right track.
  • Build a Strong Network: Connecting with other entrepreneurs and joining local business organizations can provide invaluable insights and support as you establish your Limited Partnership. Learn from the experiences of others, share your knowledge, and foster relationships that can help your business grow and thrive in the competitive market.

FAQs

What is a limited partnership?
A limited partnership is a type of business structure where there are one or more general partners who manage the business and one or more limited partners who have limited liability.
What is a general partner?
A general partner is a person or entity who manages the limited partnership and has unlimited personal liability for the business’s debts and obligations.
What is a limited partner?
A limited partner is a person or entity who invests in the limited partnership but does not take part in managing the business and has limited liability for the business’s debts and obligations.
How do I form a limited partnership in Tennessee?
To form a limited partnership in Tennessee, you must file a certificate of limited partnership with the Tennessee Secretary of State’s Office.
What information must be included in the certificate of limited partnership?
The certificate of limited partnership must include the limited partnership’s name, its duration, the name and address of all general partners, the registered address and agent for service of process, and the capital contributions of each partner.
How much does it cost to form a limited partnership in Tennessee?
The filing fee for a certificate of limited partnership in Tennessee is $300.
Do I need to obtain any licenses or permits to start a limited partnership in Tennessee?
Depending on the type of business, you may need to obtain certain licenses and permits from state or local government agencies in Tennessee.
Can a limited partnership have just one general partner?
Yes, a limited partnership may have just one general partner.
Can a limited partnership have an unlimited number of limited partners?
Yes, a limited partnership can have an unlimited number of limited partners.
Can a limited partner become a general partner?
Yes, a limited partner can become a general partner if they are added as a general partner by amending the partnership agreement.
Can a general partner become a limited partner?
No, a general partner cannot become a limited partner as they are responsible for managing the business.
Can out-of-state residents form a limited partnership in Tennessee?
Yes, out-of-state residents can form a limited partnership in Tennessee.
What tax implications does a limited partnership have in Tennessee?
Limited partnerships in Tennessee are considered pass-through entities, meaning that the partnership’s income, gains, losses, deductions, and credits are passed through to the partners for individual tax reporting purposes.
Must a limited partnership have an office in Tennessee?
Yes, the limited partnership must have a registered office in Tennessee where the Secretary of State can deliver legal notices.
Can a limited partnership change its name?
Yes, a limited partnership can change its name by filing a notice of name change with the Tennessee Secretary of State.
Can a partner be removed from the limited partnership?
Yes, a partner can be removed from the limited partnership by amending the partnership agreement or through court action.
How is a limited partnership dissolved in Tennessee?
A limited partnership may be dissolved voluntarily by the partners, or involuntarily by court order.
Are limited partnership agreements required in Tennessee?
Yes, limited partnership agreements are required in Tennessee to outline each partner’s responsibilities, contributions, and distributions.
Must a limited partnership have a written partnership agreement?
Yes, a limited partnership must have a written partnership agreement.
What happens if the limited partnership agreement conflicts with state law?
If the limited partnership agreement conflicts with state law, state law governs.
What are the advantages of a limited partnership in Tennessee?
Limited partnerships in Tennessee offer limited liability protection for the partners and pass-through taxation.
What are the disadvantages of a limited partnership in Tennessee?
Limited partnerships in Tennessee have higher start-up costs and are required to have complex partnership agreements.
Can a limited partnership be converted to another business entity in Tennessee?
Yes, a limited partnership can be converted to another business entity by filing the appropriate paperwork with the Tennessee Secretary of State.
What happens if a limited partner becomes involved in the management of the business?
If a limited partner becomes involved in the management of the business, they may lose their limited liability protection.
Can a limited partnership sell stock to raise capital?
No, limited partnerships cannot sell stock to raise capital.
Who is responsible for the limited partnership’s debts?
The general partners are responsible for the limited partnership’s debts.
Is an operating agreement necessary for a limited partnership in Tennessee?
Yes, an operating agreement is necessary to clarify the roles and responsibilities of each partner in the limited partnership.
Can a limited partnership be taxed as an S corporation in Tennessee?
No, a limited partnership cannot be taxed as an S corporation in Tennessee.
Can a foreign limited partnership do business in Tennessee?
Yes, a foreign limited partnership can do business in Tennessee if it is authorized to do so by the Secretary of State.
What is a Limited Partnership (LP)?
A Limited Partnership is a business entity where participants have limited personal liability, and only a general partner has unlimited personal liability.
What is required to form an LP in Tennessee?
In Tennessee, you must file a Certificate of Limited Partnership with the Secretary of State.
Can I form an LP for any type of business?
Yes, you can form an LP for any type of business in Tennessee as long as it is not prohibited by state or federal law.
Do I need to use a registered agent for my LP in Tennessee?
Yes, you must have a registered agent for your LP in Tennessee.
What is a registered agent?
A registered agent is a person or entity appointed to receive legal and tax documents on behalf of the LP.
Can I act as my own registered agent?
Yes, you can act as your own registered agent in Tennessee as long as you are a resident of the state and have a physical Tennessee address.
Can I change my registered agent later?
Yes, you may change your registered agent by filing a Statement of Change of Registered Agent and/or Registered Office with the Secretary of State.
Are LPs required to have bylaws or an operating agreement in Tennessee?
Yes, LPs are not required to have bylaws or an operating agreement in Tennessee, but it is highly recommended.
How many partners are required to form an LP in Tennessee?
At least one general partner and one limited partner are required to form an LP in Tennessee.
Can an LP in Tennessee have an unlimited number of partners?
Yes, there is no limit to the number of partners an LP may have in Tennessee.
How many LPs can I be a part of in Tennessee?
There is no limit to the number of LPs you can be a part of in Tennessee.
How is the liability of LP partners determined in Tennessee?
In Tennessee, limited partners are only liable for the amount of their investment, while general partners are personally liable for the business debts.
What are the minimum capital requirements for an LP in Tennessee?
There are no minimum capital requirements for an LP to be created in Tennessee.
Is formation of an LP in Tennessee taxable?
Yes, formation of an LP in Tennessee is taxable and subject to the state’s franchise tax.
What is the cost to form an LP in Tennessee?
The filing fee for forming an LP in Tennessee is $100.
How often do LPs in Tennessee need to file an Annual Report?
LPs in Tennessee must file an Annual Report every year by April 1st.
What information is required on an Annual Report for an LP in Tennessee?
An Annual Report for an LP in Tennessee must include updated information about the LP, including changes to its registered agent, address, and general partner.
Can LP partners be non-residents of Tennessee?
Yes, LP partners may be non-residents of Tennessee unless state or federal law prohibits.
Can an LP in Tennessee take on debt?
Yes, an LP in Tennessee can take on debt, but only the general partner is personally liable for this debt.
Can a limited partner become a general partner in Tennessee?
Yes, a limited partner may become a general partner in Tennessee with full personal liability.
Can a family member become a limited partner of an LP in Tennessee?
Yes, family members may become limited partners of an LP in Tennessee, regardless of relationship to the general partner.
Are there any business locations that the Secretary of State will not allow as an LP’s registered office address in Tennessee?
Yes, the Secretary of State will not allow P.O. Boxes or virtual offices as an LP’s registered office address in Tennessee.
How long does the formation process typically take for an LP in Tennessee?
The formation process for an LP in Tennessee usually takes about three to five business days to complete.
Can an LP in Tennessee be a pass-through tax entity?
Yes, LPs in Tennessee can elect to be taxed as a partnership, and all profits and losses flow through to the individual partners.
How is a Tennessee LP taxed?
Tennessee LPs are subject to the state’s franchise tax, excise tax, and income tax, and they must file an annual tax return.
Can an LP in Tennessee convert to another type of business entity?
Yes, an LP in Tennessee may convert to a different type of business entity, but it will require filing appropriate paperwork with the Secretary of State.
Can a Tennessee LP do business in other states?
Yes, a Tennessee LP can conduct business in other states but must register as a foreign entity in each state where it does business.
How can I dissolve my Tennessee LP?
You can dissolve your Tennessee LP by filing a Certificate of Cancellation with the Secretary of State and settling all remaining business obligations.
What happens to remaining assets after dissolution of a Tennessee LP?
After dissolution of a Tennessee LP, any remaining assets will be distributed to LP partners according to the terms of the partnership agreement or state law.

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Conclusion

Starting a Limited Partnership in Tennessee offers numerous benefits and opportunities for your business. By diligently following the steps outlined in this guide, consulting with professionals when necessary, and capitalizing on the advantages of the Tennessee business environment, you can build a successful and profitable Limited Partnership. Remember, a well-planned and executed business strategy is the key to long-term success in the competitive market.

Don’t wait any longer to embark on your entrepreneurial journey! Start your Tennessee Limited Partnership today, and take advantage of this remarkable state’s thriving economy and diverse market. For more valuable resources, expert guidance, and support, visit LLCBase and let us guide you to realize your business dreams.

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