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Colorado Partnerships - Just the Basics PleaseThere are, generally four primary types of partnerships available in Colorado, excluding Limited Partnership Associations which are, in my opinion, of limited use for the everyday business entity formation evaluation issue. In the chart below, each main type of partnership form available to a Colorado Business is outlined whether the partnership has general and/or limited partners and whether you must register with the Office of the Colorado Secretary of State before such an entity is legally recognized. One basic tenant of partnership law is that, two or more individuals may form a partnership if they are engaged in a business enterprise for profit. Thus, if two or more individuals or entities become involved in a common business activity and share the profits thereof, a general partnership has been formed under Colorado law. It is not necessary that any formal paperwork or documentation be filed with local or state authorities, just an agreement between the parties, either oral or written. All other partnerships, Limited Partnerships (LP), Limited Liability Partnerships (LLP), Limited Liability Limited Partnerships (LLLP) and Limited Partnership Associations (LPA) require formal registration with the Colorado Secretary of State's Office. Below, are some basic definitions relating to partnerships in Colorado. Definitions:General Partner: Individual or entity that makes day-to-day management decisions and is responsible for all managerial and operational aspects of the company. Limited Partner: Individual or entity that has money or property invested in the partnership. A limited partner does not have management duties or authority. (e.g., a silent partner) Types of Colorado Partnerships & Their Organization
* Use a special combined form and save an extra filing fee General PartnershipsYou do not need to register with the Colorado Secretary of State's Office to operate as a General Partnership. You MUST, however, register the name of the partnership with the Colorado Department of Revenue (see business tools or Form CR 100). Remember, under the General Partnership form of business operation, ALL General Partners are jointly and severally liable for all debts of the Partnership. That means that if one partner causes the Partnership to incur debt or liabilities (e.g., including judgments from lawsuits), each and every General Partner is liable for the entire amount. This would mean that a creditor could attach any and all property of all General Partners to pay the debt. Limited PartnershipsYou must register with the Colorado Secretary of State's Office to operate as a Limited Partnership (LP). You must have at least one (1) General Partner and one (1) Limited Partner. The General Partner makes all day-to-day decisions and is the managing partner of the partnership. The Limited Partner, does NOT participate in the day-to-day partnership management or operational decisions or activities. The General Partner is wholly liable for all partnership debts. The Limited Partner is NOT liable for partnership debts and may loose no more that the Limited Partner's contribution to the partnership. CAUTION: If a Limited Partner owes money to the partnership, the Limited Partner will be liable to any creditor of the partnership for any such debt owed to the partnership. Limited Liability PartnershipYou must register with the Colorado Secretary of State's Office to operate as a Limited Liability Partnership (LLP). A Limited Liability Partnership has ONLY General Partners. All the General Partners have the power to make day-to-day managerial decisions. All the General Partners are protected from the debts and liabilities of the partnership just like limited partners in a Limited Partnership. Thus, the General Partners may not loose more than their investment in the partnership. CAUTION: If a General Partner owes money to the partnership, the General Partner will be liable to any creditor of the partnership for any such debt owed to the partnership. Limited Liability Limited PartnershipYou must register with the Colorado Secretary of State's Office to operate as a Limited Liability Limited Partnership (LLLP). A Limited Liability Limited Partnership has both General and Limited Partners and all the partners enjoy limited liability. That is, all partners of the partnership are liable only for their respective contributions to the partnership and may not be subject to creditor claims for debts of the partnership. CAUTION: If a General or Limited Partner owes money to the partnership, the General or Limited Partner will be liable to any creditor of the partnership for any such debt owed to the partnership. Other Issues & AgreementsAny partnership should have one or more of the following agreements:*
* You may find that it is necessary to engage legal counsel to adequately prepare the above documents. Copyright © 2000, ScrantonPC.com |