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Is a limited partnership a good investment?

On Behalf of | Nov 7, 2022 | Business Law |

If you do not want the hassles of running a business daily in New York but want to invest in a company, finding a person looking for a limited partner may be a good solution. As a limited partner, you invest capital into the business, but you cannot control any aspect of how the company operates. Since you have less control, rules limit your liability to the invested capital.

Are limited partnerships registered?

The New York Secretary of State is responsible for registering limited partnerships in New York. Therefore, the general partner must submit an application and a filing fee.

Is there a contract with a limited partnership?

Business law dictates that you and the general partner will need to have a contract drawn up. If there are other limited partners, they must be on the contract too. At a minimum, the contract must describe how the company will divide profits and losses. Additionally, the contract must outline the process if you decide to sell your limited partnership.

What are the advantages of being a limited partner?

As a limited partner, no one can hold you liable for losses suffered by the company. Therefore, you only lose your initial investment if a company does not make a profit. Secondly, profits do not count as income when you file personal taxes. Instead, you will receive a Schedule K-1s to provide to the Internal Revenue Service.

Limited partnerships can be a good investment for individuals who do not want to run a company actively. While you may lose your initial investment if the company fails, assuming the partnership is legally established, you will only lose your investment. Still, if the company makes money, you will receive a share of the profits.

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