The “limited partnership” is a very useful vehicle for many real estate and estate planning needs as it is a “pass through” entity for tax purposes, like an S Corporation, in that the partnership pays no tax. A return must be filed, but the tax consequences pass through to the partners. A partnership has certain advantages over an S Corporation, including the fact that there are no limitations on who may be a partner, or on how many partners you can have. Moreover, there is more flexibility on allocating profits, losses and tax credits through what are known as “special allocations” as compared to a corporation.
A limited partnership is a partnership whose “passive” or “limited” partners have liability insulation for the entities debts, but yet can share in the equity benefits of the organization. Although the general partner in a limited partnership is liable for the debts of the partnership by definition, in Missouri, an annual election can be made to insulate the liability of the general partner, in which case the entity is referred to as a “limited liability limited partnership.” Along the same vein, an existing general partnership can file an annual election in Missouri for liability insulation of its partners, in which case the entity is referred to as a “limited liability partnership.”
Although these similar names can seem confusing, we would be happy to sit down with you and explain each one so that you will understand exactly how these entities can benefit you in your unique situation.