Partnership

A partnership under Texas law can be a general partnership, a limited partnership or a limited liability partnership. A general partnership is created by two or more people for the purpose of carrying on a business. A limited partnership is a partnership formed by two or more people, generally one or more general partner and one or more limited partner. A limited liability partnership in Houston is a partnership where the liability of the partners for any debts or liabilities is limited.

Houston Partnership Attorney

If you want to create a partnership in Houston, or any of the surrounding areas in Texas, including Spring, Humble, Tomball, Aldine, Atascocita, Klein, Jersey Village, The Woodlands, Conroe or Oak Ridge North, contact the law offices of Wilhite & Lea, P.C. The attorneys at Wilhite & Lea are knowledgeable in all areas of Texas’ business laws and will help you create the best entity for your chosen business. Call Wilhite & Lea at (281) 537-2171 about creating a partnership.

General Partnership in Houston

A general partnership in Texas is made of two or more people for the purpose of carrying on a business. The partners in a general partnership do not have to enter into a formal written agreement in order to create a partnership or file the agreement with the Secretary of State, but partnership agreements usually prevent conflict and arguments in the partnership. Most partnerships operate under a partnership agreement in Houston. Also, each partner’s interest in the general partnership is transferrable and any general partner can withdraw or be expelled from the business at any time.

Additionally, according to the Texas Business organizations Code § 152.302, each partner is liable for any business decisions any other partner made for the purpose of carrying on the ordinary course of the partnership or for the kind of business in which the partnership was engaged. General partners are also liable for any loss or injury to a person or any other penalty that resulted from the conduct of a partner that was acting in the ordinary course of the partnership’s business or with the authority of the partnership.

Most general partnerships will operate under an assumed name, or the business name. If operating under an assumed name, the general partnership is required to file an assumed name certificate, which is also called the “DBA,” or “Doing Business As” form, with the county clerk where the business is primarily operated, or where its headquarters are located.

According to the Texas Business Organizations Code § 152.203, all partners in a general partnership have equal rights in the management and conduct of the partnership’s business. Under section 152.204 of the Business Organizations Code, each partner also owes the other partners and the partnership a duty of loyalty and a duty of care.

Under the Texas Business Organizations Code section 152.202, the partners in a general partnership are each credited with an amount equal to the cash and value of property the partner contributed to the partnership for the purpose of determining the partner’s share of the partnership’s profits. Each partner is also charged with an amount equal to the cash and value of other property distributed by the partner to the partnership for the purpose of determining the partner’s share of losses.

Houston Limited Partnership

A limited partnership in Texas is created by two or more people for the purpose of carrying on a business, and is comprised of at least one general partner and one limited partner. A limited partnership operates under a written or oral partnership agreement, which describes the limited partnership and the conduct of the business. The limited partnership must create a partnership agreement, but it does not have to be filed. However, the limited partnership must file a certificate of formation with the Texas Secretary of State.

According to the Texas Business Organizations Code § 153.102, an individual who is a limited partner is not liable for the obligations, debts or liabilities of a limited partnership, unless the limited partner is also a general partner, or the limited partner acts as a general partner by participating in the control of the business, along with exercising the rights and powers associated with a limited partner.  

As defined in section 153.110 of the Texas Business Organizations Code, a limited partner may withdraw from a limited partnership only at an event that has been specified in the written partnership agreement. General partners can withdraw from the limited partnership or be removed at any point in time, according to section 153.155, except as otherwise provided in the partnership agreement.

After a limited partnership has been formed, additional general or limited partners may be admitted if set forth in the written partnership agreement or if all partners provide their written consent.

Limited Liability Partnership

Texas law also provides for a limited liability partnership, which limits the liability of its general partners, in addition to limiting the liability of its limited partners. A limited partnership is defined as a limited liability partnership in Texas if the partnership registers as a limited liability partnership and complies with certain chapters of the Texas Business Organizations Code.

All partners in a limited partnership are responsible for making day-to-day decisions of the partnership, but are not personally liable for debts or liabilities accrued by the business or for business decisions or mistakes made by another partner.

Any applications to become a limited liability partnership or to withdraw from a limited liability partnership must be signed by at least one general partner.

Creation of Partnership in Houston

In order to create any type of partnership in Texas, the partners are required to do all of the following:

• Select a business name that is not substantially similar to any other business name. Most partners want to operate their business under a fictitious or assumed name, which is commonly called a DBA name or “doing business as”; and
• Register the business with the Texas Secretary of State by filing the certificate of formation.

The certificate of formation is also known as the articles of formation or articles of incorporation and includes the following:

• The partnership’s name;
• The duration of the partnership if the partnership is not intended to exist perpetually;
• The business organization formed is a partnership and the type of partnership;
• The purpose of the partnership;
• The partnership’s registered office street address and the name of the registered agent;
• The name and address of every organizer and general partner if a limited partnership;
• The responsibilities and relationship of all members, managers, general partners and limited partners of the partnership; and
• The signature of all partners.

A registered agent is anyone who can be served with process on behalf of the partnership, and is basically designated as the agent or representative of the partnership.

Additionally, limited partnerships must also include in the certificate of formation the address of the principal office of the partnership where the business records are kept. However, limited partnerships are not required to include in the certificate of formation the purpose for which the partnership is formed and the period of the partnership’s duration.

Drawbacks of a Partnership in Houston

The disadvantages of a general partnership can include:

• All owners and partners are jointly and personally liable for all debts, judgments and liabilities of the business; and
• All partners and owners must pay personal income taxes on all net business profits.

The disadvantages of a limited partnership can include:

• All general partners are jointly and personally liable for any debts, liabilities or judgments against the business;
• This form of partnership is generally more expensive to create than a general partnership; and
• This form of partnership is only beneficial to a small number of businesses, such as investment groups.

The disadvantages of a limited liability partnership can include:

• This form of business may only be limited to certain professions; and
• All partners may be required to pay personal income taxes on the business profits and taxes on the business entity.

Wilhite & Lea, P.C. | Houston General Partnership Lawyer

Contact Wilhite & Lea, P.C. today for a consultation about creating a limited partnership, limited liability partnership, or general partnership in Harris County in Texas. Attorney C. Keith Lea of Wilhite & Lea is an experienced business law attorney in Houston who will help you identify your best business entity option and follow the correct procedures and guidelines to quickly create your business. Contact Wilhite & Lea, P.C. at (281) 537-2171 for a consultation about creating a partnership throughout Harris County, and the surrounding areas of Montgomery County, Washington County, Grimes County, Fort Bend County and Waller Count.