by Richard Keyt, Arizona LLC, corporate and business lawyer
This article is part of a series of nine related articles I wrote about the seven types of entities used in Arizona to operate a business and to hold business assets and investment real estate. The articles are: (1) the “Best” Arizona Entity, (2) limited liability companies, (3) sole proprietorships, (4) general partnerships, (5) limited partnerships, (6) C corporations, (7) S corporations, (8) business trusts, , and (9) the entity comparison table. The type of entity can have significant income tax and asset protection consequences. The articles discuss the entities in terms of ease and cost of formation, number of owners & restrictions on ownership, privacy, control and management, owners protection from liabilities of the entity, and federal income taxation issues.
Arizona Limited Partnership
Ease of Formation & Cost
The Arizona limited partnership is a special type of partnership specifically authorized and created under Chapter 3 of Title 29 of the Arizona Revised Statues. To form an Arizona limited partnership, the partners must file a document with the Arizona Secretary of State called a “Certificate of Limited Partnership.” This certificate must state:
- The name of the limited partnership.
- The address of the partnership’s office.
- The name and address of the agent for service of process.
- The name and the business address of each general partner.
- The latest date, if any, on which the limited partnership must dissolve.
- Any other matters the general partners determine to include therein.
Because a Certificate of Limited Partnership must be filed to create an Arizona limited partnership, this type of entity is somewhat complex to create. The Arizona Secretary of State provides a sample form Certificate of Limited Partnership. The fee to file a Certificate of Limited Partnership in Arizona is $10 plus $3 per page.
There are some technical requirements that must be satisfied to create a limited partnership in Arizona. The name of a proposed Arizona limited partnership must not be identical to or too similar to the name of another Arizona limited partnership, corporation, limited liability company or registered trade name. Before selecting a name for a limited partnership, you should conduct preliminary search for existing names at in the Secretary of State’s name database. The name selected for the partnership must include “Limited Partnership” or “LP.” For example, “XYZ Limited Partnership” or “ABC LP.” The partnership must have a physical address in Arizona, a statutory agent in Arizona, and all general partners must sign the Certificate of Limited Partnership.
Arizona limited partnerships may exist without any a written agreement of any kind signed by the partners other than the Certificate of Limited Partnership. However, everybody who intends to form a limited partnership or who has an existing limited partnership should have the partners adopt a written limited partnership agreement that specifies the rights and obligations of all the partners.
Number of Owners & Restrictions
A limited partnership is owned by two types of partners, general partners and limited partners. A limited partnership must have at least one general partner and one limited partner. There are no limits on the number of either type of partner or on the types of entities that can be partners. Caveat: Some limited partnership interests are securities for the purposes of federal and state securities laws, in which case securities law may limit the number and types of investor/partners.
Control & Management
General partners of a limited partnership are responsible for managing the business and affairs of the partnership. Limited partners, however, generally have little, if any, involvement in managing or operating the limited partnership. The difference management powers granted to general partners and limited partners is one of the two primary differences between a general partnership and a limited partnership.
Limited partners may have certain limited rights granted by a partnership agreement such as the right to attend meetings of partners and the right to vote on the sale of all or substantially all of the assets of the partnership and other major activities of the partnership. In fact, Arizona law provides that a limited partner who participates in the control of the business may become liable for the obligations of the partnership. A.R.S. § 29-319.A.
Arizona law does not require that a limited partnership have annual meetings, file reports with the Arizona Corporation Commission, Arizona Secretary of State or other state agency or that the partnership pay any annual fees.
The names and business addresses of each general partner of an Arizona limited partnership are a matter of public record in the office of the Arizona Secretary of State. Unless a limited partner is also a general partner, the names, addresses and interests of limited partners are not a matter of public record in Arizona.
Owner’s Protection from Liabilities
The second of the two primary differences between general partnerships and limited partnerships is that the limited partners are, as a general rule, not liable for the obligations and liabilities of the partnership. A.R.S. § 29-319.A. Caveat: See the discussion above concerning when a limited partner becomes liable for the obligations and liabilities of the partnership. All general partners of a limited partnership, however, are personally liable for all the obligations and liabilities of the partnership.
Federal Income Taxation
In general limited partnerships are taxed the same as general partnerships. The limited partnership is not a taxpaying entity and the profits and losses are passed through to the general and limited partners. See the discussion above about general partnership taxation.
Before the creation of the limited liability company, the limited partnership was a very popular vehicle for owning and operating real estate businesses and investments. The limited liability company replaced the limited partnership as the preferred entity for owing and operating real estate businesses and investments.
How to Hire Richard Keyt to Form an Arizona Limited Partnership
If you have questions about forming an Arizona limited partnership, call Arizona entity formation attorneys Richard Keyt 480-664-7478 or his son attorney Richard C. Keyt, 480-664-7472. We do not charge for answering questions about Arizona limited partnerships.
If you are ready to hire us to form your Arizona LP, click on the link below and complete and submit our online Limited Partnership Formation Questionnaire.