In Texas there are three general kinds of partnerships: General Partnerships, Limited Partnerships, and Limited Liability Partnerships.
In a General Partnership, you and at least one other person agree to form a partnership; there is no filing necessary with the Texas secretary of state. There is no corporate protection for any liability and the partners are jointly and severally liable for the debts and liabilities of the partnership. Because of the lack of corporate formalities required to start a partnership, General Partnerships are very attractive to startup companies, but the lack of any liability protection should dissuade all but some very limited partnership ventures from using this corporate structure.
Limited Partnerships must have one or more general partners as well as one or more limited partners. To form an LP, you will need to file a form with the Secretary of State of Texas, and banks and other service providers will most likely require a partnership agreement of some kind. In the tiered partnership structure, general partners share all of the liability for the debts and liabilities of the partnership, while limited partners are only liable up to the amount they initially invested in the company. This liability protection for limited partners does come at a cost: limited partners in LPs have no managerial discretion or ability to direct the business of the LP.
Limited Liability Partnerships extend the liability protections of an LP to all partners. LLPs are common entity structures for attorney firms and doctor offices, as all partners receive liability protection to an extent, and are only liable only if the liability is due to the fault of one of the partners. The main drawback for LLPS in Texas is the cost associated with filing with the Secretary of State, which is $200 per partner and the required $100k in liability insurance.
Forming a partnership of any kind in Texas requires careful consideration of not only what your business looks like today, but what you want your business to look like in five years or even ten years. Avoiding what might seem like expensive costs now could mean a more expensive restructuring or refiling later on. Texas Business Attorney Nathaniel Gilbert helps clients choose the right entity structure that best fits the direction their business is headed; For a free consultation with Nate, click here to call now. If you want to learn more about partnerships and business law in Texas, click here.