Limited Partnership

Formation
The creation of a limited partnership requires filing with the secretary of state.  Each state has its own requirements.  A Limited Partnership is created when two or more people agree to be partners in a business venture.  However, not all partners share in the control of the venture and not all partners share equal liability.  You must have a written Limited Partnership agreement.

Administration
The administration is governed by the Limited Partnership agreement.  The level of difficulty of administration will depend primarily on the structure of the partnership’s control.

Control
It could be that there is only one general partner and the rest are limited partners in which case the general partner has complete control.  If there is more than one general partner, duties have to be allocated between the general partners.  Limited partners have no vote.  They simply share in gains and losses as appropriate.

Asset Protection
Asset Protection is very state specific.  How much asset protection you and your business are afforded depends on the state laws dealing with Limited Partnerships.  The asset protection afforded within a Limited Partnership varies widely from state to state.  Kansas has very strong laws regarding asset protection for assets held within a Limited Partnership.

Taxation
The income of the Limited Partnership, whether or not distributed, passes through to each of the partners pro rata for tax purposes.  Each partner would see their portion of income (or losses) and deductions reported to them on a form K-1.  Those figures are used to prepare their personal tax returns.

Going Concern
The business “may” continue after the death of a partner but only if the partnership agreement allows it to.

Discounting
Discounts vary based on two things; 1) The laws of the state in which the Limited Partnership is established and 2) the restrictions placed in the Limited Partnership Agreement.  Kansas has very favorable laws with regards to the discounting of business interests restricted within a Limited Partnership.  If the Limited Partnership Agreement is properly drafted, in a state such as Kansas or Wyoming the discount can be very significant.  There have been instances (though very few) where the IRS approved discounting of over 70%.  This means that the value of the business interest you own may be significantly less than the value of the assets placed within the business.  This leads to a lot of planning possibilities in larger estates.