A Texas limited partnership consists of an agreement between at least two partners, one of whom must be designated as a general partner and another designated as a limited partner. The general partners control the operation of the business on a day-to-day basis. Members of the board of directors can retain their limited partner status if they don't assume such control.
As stated by the Law for Change website, the general partner or partners have unlimited liability for the debts and obligations of the partnership to third parties. Outside creditors can go after the personal assets of the general partners. On the other hand, the personal assets of limited partners are protected from third-party actions, although a limited partner is liable to the general partners for contributions he agreed to make to the general partners under the partnership agreement.
Limited partnerships that meet certain criteria related to limited liability, including centralized management and an ability to transfer ownership interests, can qualify as "pass-through" entities for tax purposes. This enables the partners to avoid taxation on the partnership itself. As the QuickMBA website notes, in a limited partnership "income can be allocated each year among the partners in a way that minimizes taxes." However, if your partnership doesn't meet the criteria, it will be taxed as a corporation.
The general partner submits the certification of formation, which includes the name of the limited partnership, the address of the partnership's registered office in the state, and the names and addresses of all general partners. The name of the partnership must contain the words or abbreviations of "limited" or "limited partnership." The partnership operates under the provisions of the partnership agreement, which can be written, oral or implied. It also can be revised by the partners.
While the TBOC has no formal record-keeping requirements, the general partners are obligated to give limited partners certain information, such as the status of the business and the financial condition of the limited partnership. So they need to keep such records in case of a dispute between the general and limited partners.