Florida Limited Partnership/LLLP Basics
-A Florida Limited Partnership is like a general partnership; however it has two types of partners. A Florida Limited Partnership must have at least one general partner who manages the business and is personally liable for its debts and claims. A Florida Limited Partnership must also have a Limited Partner who is typically an investor who contributes capital to the business yet is not involved whatsoever in the management. The Limited Partner is not personally liable for business debts and claims as long they never participate in management.
If you want to protect the general partner from personally liability it is wise to have an Florida LLC be the general partner or transform the LP to an LLLP see below.
-Income Taxation. For income tax purposes, limited partnerships generally are treated like general partnerships, with all partners individually reporting and paying taxes on their share of the profits each year. The Limited Partnership files an informational partnership tax return of income, and each partners receives IRS Schedule K-1 (1065), Partner's Share of Income, Credits, Deductions, etc. from the partnership. Each partner then files this form with their individual IRS 1040 tax return. Limited partners , as a rule do not have to pay self employment taxes because they are not active in the business, their share of partnership income is not considered “earned income” for purposes of the self-employment tax.
-LLLP. An LP may be transformed into an LLLP. All of the above applies to the LLLP. An LLLP gives the general partner limited liability in case of a lawsuit. It is a good idea to become an LLLP to protect the LLLP. The Cost for this conversion is an additional $195.00
FLORIDA LP $1,500.00
New Florida Statutory Provisions Give New Life to the Florida Living Partnership
-The Limited Partnership will have perpetual duration. There no longer will be a need to state a latest date upon which the partnership is to dissolve in the certificate of limited partnership filed with the Florida Department of State.
-The Certificate of Limited Partnership filing fees drop almost by half. Pursuant to the new laws, the filing fee is now a flat fee and the additional capital contribution fee “that used to catch the unwatchful” is repealed.
-Changes to the Limited Partner management and control. Limited partners can now be more active in partnership management and control. Nonetheless, general partners should avoid giving limited partners management and control rights because of potentially adverse transfer tax effects that accompany such rights.
-The new rules bolster the argument, for federal transfer tax purposes, that a general partner interest is separate, distinct, and qualitatively different from a limited partner interest, even if the general partner also owns limited partner interests. It also bolsters the argument that the general partner’s fiduciary duties prohibit it from acting arbitrarily and solely for its own benefit.
-A judgment creditor is entitled only to a charging lien, and has no right to foreclose a debtor’s inters in a limited partnership or to receive the underlying partnership assets.