A limited partnership contains two categories of partners: general partners and limited partners. General partners manage the business and remain liable for all partnership debts and obligations. Limited partners contribute capital to the partnership but take no part in its day-to-day management; their liability for debts is limited to the amount of capital they have invested. In South Carolina, the Limited Partnership Act governs the formation and operation of limited partnerships in the state.
Forming a Limited Partnership
South Carolina limited partnerships are formed by filing a certificate of limited partnership with the South Carolina Secretary of State. The certificate must include the name of the limited partnership and its business address, the name and address of each general partner and the name and address of the agent to receive official documents. The agent may be either an individual resident in South Carolina or a corporation authorized to conduct business in the state. The certificate should also include the date on which the limited partnership will dissolve, as well as any other matters the partners wish to include. The limited partnership takes effect from the date of filing of the certificate, or alternatively at a later date specified in the certificate.
Section 33-42-30 of the Act states that the name of each limited partnership organized in the state of South Carolina should contain the words “limited partnership” or one of the abbreviations “L.P.” or “LP”. The name must not be the same as, or similar to, that of any other corporation or limited partnership in the state. In general, the names of the limited partners should not be included in partnership business name.
A limited partner is not liable to third parties for any partnership obligations, unless he is also a general partner or takes part in the running of the business. To protect his investment, a limited partner is entitled to ask the general partners for copies of the partnership accounts and other relevant financial information.
Profits and Losses
The partners in a limited partnership usually sign a partnership agreement to govern their respective rights and obligations. The agreement generally specifies how profits and losses are to be allocated among the partners. If it does not, the Limited Partnership Act states that profits and losses should be distributed on the basis of the value of each partner’s financial contribution to the partnership.
Under Section 33-42-60 of the Act, a South Carolina limited partnership must keep in its office a current list of names and mailing addresses of all general and limited partners. It must also keep a copy of its certificate of limited partnership, all tax forms for the most recent three years, copies of any written partnership agreements and any financial statements for the three most recent years. Unless indicated in a written partnership agreement, there should be a writing that sets out any events that will result in the limited partnership being wound up and dissolved.