Limited partnerships, or LPs, are governed by the Limited Partnership Act in Delaware. This act authorizes the formation of a partnership with at least one general partner and additional limited partners. While the general partners remain personally liable for the debts of the business, limited partners are liable only up to the amount of their financial investment. To form, operate or dissolve an LP in Delaware, you must observe all state guidelines and filing requirements.
As part of the formation of a limited partnership in Delaware, you must select a name for the business. The name cannot be the same or deceptively similar to another company operating within the state unless you receive the written consent of that company. In addition, the name must include the words "Limited Partnership" or "L.P." and must not contain the word "bank" or allude to being in the banking business, unless operating under the supervision of the state Bank Commissioner. You may check the availability of any name through the website of the Delaware Department of State, Corporations Division. Once selected, the name may be reserved by filing a name application with the department and including the required fee.
Once the name of your partnership has been reserved, you must complete a Certificate of Limited Partnership. In addition to the name, the certificate must include the business address and the name of the registered agent, as well as the names and addresses of all general partners. The document must be signed by all general partners, with the signature of the limited partners being optional. After the certificate is filed with the Department, the partnership is considered officially formed. At that time, you may request a Certificate of Status or Certificate of Good Standing from the Department. These certificates serve to put interested parties on notice of the partnership's status and indicate that all required documents have been filed. Certificates are often necessary to obtain a business loan or to apply for state permits or licenses.
In Delaware, partners in a limited partnership may enter into partnership agreements. Although not required by law, these agreements can control how the partnership will operate, including specifications on how profits and losses are to be divided, the procedure for bringing in new partners or buying out existing partners, and the process for resolving disputes. Unlike other states, Delaware does not require that these agreements be in writing or filed with the state.
A limited partnership will terminate automatically if an end date is specified in the partnership agreement. If the existence of the LP is perpetual, it may be dissolved in any manner outlined in the partnership agreement, or by the consent or vote of all of the general and limited partners. In addition, an LP will terminate by the withdrawal of all general partners, if no replacement general partner is installed within 90 days. Aside from dissolving the company internally, an LP may be dissolved upon a petition by a partner to the Chancery Court, with evidence that it is no longer reasonable and practicable to carry on business in accordance with the partnership agreement. For example, if only two general partners are left, and they have suffered a falling out leading to an insurmountable decision-making deadlock, a judicial dissolution might take place.