8941 / How can a taxpayer establish a family limited partnership (FLP)?

The creation of a partnership involves several steps that should be followed in order to ensure that the partnership is properly formed and that the entity structure is respected. A FLP is a product of state law. Therefore, the laws of the state in which the entity is formed will govern the creation of the entity.

As long as the entity is formed for a legitimate business purpose, properly formed, and properly maintained under applicable state law, the entity should be respected for tax purposes. Although the exact steps for creating a partnership vary from state to state, the general steps required to form a partnership, or a limited liability company that elects partnership taxation, are as follows:

1. Create a name for the partnership.The partnership name should be approved by the office of the Secretary of State in the state in which the partnership is being formed. Any partnership filings will not be accepted if the partnership name is found to be impermissibly similar to another name already on file.


2.   Draft a Limited Partnership Agreement. The importance of the provisions in this agreement cannot be overstated and are discussed in further detail in Q .


3. Designate a registered agent.The registered agent must be authorized to conduct business in the state where the entity is formed. The agent must have a physical street address in the state.


4.   File a Certificate of Limited Partnership with the Secretary of State. The Certificate will request the name and addresses of the partners, as well as the agent’s name and address.


5. .  Pay required fees. A filing fee must generally be paid to the Secretary of State in the state where the entity is formed.


6.   Register for an Employer Identification Number (“EIN”). The EIN number is assigned to the partnership by the IRS and is needed conduct business transactions. IRS Form SS-4 can be used to apply for an EIN, or individuals may choose to complete an online application.¹


7.   Register for a State ID Number. A State ID number is similar to the federal EIN number for business classification purposes.