Houston Partnership Formation Attorneys

Forming a General Partnership, LP, LLP, or LLLP in Texas? Choose the Right Structure Before You Sign.

If you and a co-owner are running a business for profit in Texas and have not formed an LLC or corporation, state law may already treat you as general partners. That means each of you can be personally responsible for the business's debts. The right structure, and the right agreement, can change that.

Hendershot Cowart P.C. helps Houston business owners and partners throughout Texas choose a partnership structure, complete the state filings, and draft the partnership agreement that governs how the business runs. 

Ready to form your partnership? Call (713) 783-3110 or contact us online to get started.

On This Page:

• Types of Partnerships in Texas
• General Partnership (GP)
• Limited Liability Partnership (LLP)
• Limited Partnership (LP)
• Limited Liability Limited Partnership (LLLP)
• Joint Ventures (JV)
• Which Partnership Structure Fits Your Business?
• Texas Partnership Types at a Glance
• How Partnerships Are Taxed
• How Hendershot Cowart Can Help Form Your Texas Partnership
• What Sets Hendershot Cowart Apart
• Partnership Formation FAQs

Texas law recognizes two basic types of partnerships: 

• General partnership (GP). Two or more co-owners share management and profits. No state filing is required to form one.
• Limited partnership (LP). At least one general partner manages the business, and at least one limited partner invests without managing. An LP forms by filing with the Texas Secretary of State.

Either type can then add a liability shield by registering with the Texas Secretary of State.

• Limited liability partnership (LLP). A GP may register with the Secretary of State as a limited liability partnership to protect its partners from personal liability for the partnership's obligations.
• Limited liability limited partnership (LLLP). An LP that registers for liability protection for its general partners is called a limited liability limited partnership.

Formation

A general partnership exists the moment two or more people agree to carry on a business for profit – no state filing required. Because a GP can form without a written agreement or state filing, it can be created unintentionally.

Management and Structure

In a general partnership, each partner has equal management rights and can act on behalf of the partnership. You can establish different management roles and responsibilities through a partnership agreement. Without a written agreement, Texas law provides default rules for how your partnership operates.

Liability

The most significant drawback of a GP is that all partners are jointly and severally liable for all obligations of the partnership. This means that every partner is personally liable for all business debts and obligations – including those created by another partner. If your business gets sued or can't pay its debts, creditors can pursue your personal bank accounts, property, and assets. 

The best way to mitigate this liability exposure is to register your general partnership as an LLP. 

Is Your Business Already a General Partnership?

Are you uncertain whether your business qualifies as a general partnership? Assuming you have not filed a certificate of formation in Texas or another state, state law has identified several factors indicating the creation of a partnership. 

Do the people involved:

• Receive or have a right to receive a share of the profits;
• Have expressed an intent to be partners;
• Participate in, or have a right to participate in, control of the business;
• Share or agree to share losses or liability for claims against the business; or
• Contribute or agree to contribute money or property?

No single factor is required or decisive. Courts weigh all of the circumstances.

Formation

An LLP is a general partnership that has registered with the Texas Secretary of State (SOS) by paying a filing fee and submitting an application. Your LLP name must include "Limited Liability Partnership" or "LLP."

To keep the registration active, the partnership must file an annual report with the SOS. If the partnership fails to file the annual report or pay the required fee, the SOS will automatically terminate the LLP registration.

Management and Structure

An LLP has the same management structure as a general partnership – each partner has equal management rights by default. The key difference: all partners have limited liability protection. You're responsible for your own professional acts, but you're shielded from liability for your co-partners' mistakes or misconduct. Your partnership agreement can customize these management roles and responsibilities. 

Liability

The defining advantage of an LLP is liability protection for all partners. You're not personally liable for partnership obligations or for the negligence or misconduct of other partners. This protection applies while the partnership maintains its LLP status.

LLPs are especially valuable for professional firms because they preserve the partnership structure and its tax and governance benefits while shielding individual partners from each other's liability exposure.

Formation

To form an LP in Texas, partners must enter into a partnership agreement (written, oral, or implied) and file a certificate of formation with the Texas Secretary of State. Every LP requires at least one general partner (who manages the business and has unlimited liability) and one or more limited partners (who invest capital but have liability capped at their investment).

Management and Structure

An LP has two partner tiers with different roles and liability:

1. General partners manage the business and have unlimited personal liability for partnership debts, unless the LP is registered as an LLP. 
2. Limited partners are passive investors – they contribute capital and share in profits but cannot participate in day-to-day management. If a limited partner takes an active management role, they risk losing their liability protection.

Partnership agreements can modify these default roles and even eliminate duties of loyalty and care between partners. As of May 2025, Texas law explicitly permits general partners and limited partners to eliminate these fiduciary duties through the partnership agreement – significantly expanding flexibility to structure partnerships around business needs rather than statutory limitations.

LPs also offer more flexibility in profit allocation than corporations – you can distribute profits differently than ownership percentages, with fewer ownership restrictions.

This flexibility makes LPs popular for investment funds, oil and gas ventures, and family asset structures where investors want returns without operational responsibility.

Liability

General partners of an LP face the same unlimited personal liability as partners in a general partnership. In practice, many LPs use a corporation or LLC as the general partner to shield individuals from this exposure.

Formation

An LLLP is simply an LP that has registered as an LLP. This registration extends liability protection to the general partners, so both general and limited partners are shielded from personal liability. 

Your LLLP name must include "Limited Liability Limited Partnership," "LLLP," or a combination of "Limited" or "Limited Partnership" with "Limited Liability Partnership."

You must file an annual report with the Texas Secretary of State to maintain LLLP status. If you miss the filing deadline or don't pay the required fee, the liability shield is lost.

Management and Structure

Registering as an LLLP doesn't change how the partnership operates – only who's protected. General partners still manage the business, and limited partners remain passive investors. Limited partners who take an active management role risk losing their liability protection. 

Liability

The LLLP provides full liability protection to all partners while preserving the LP structure that works well for passive investors in industries like oil and gas and real estate. This eliminates the main drawback of the LP form – unlimited personal liability for general partners – without requiring a separate entity to serve as general partner. You get the LP's flexibility and passive-investor appeal combined with complete liability protection for everyone.

A joint venture is a collaboration between two or more parties that combine resources and expertise to accomplish a specific business goal – typically a single project or limited-term venture. Unlike a permanent partnership, a JV is designed with an exit strategy and defined endpoints.

While GPs or LPs can be used as the foundation for a joint venture, the limited liability company (LLC) has become the most used and preferred entity for Texas JVs. An LLC offers three advantages: limited liability protection for all parties, complete flexibility in structuring management and profit allocation through an LLC agreement, and pass-through taxation that avoids double taxation. 

This makes the LLC far more attractive than unstructured JVs (which default to general partnership rules and expose all parties to joint and several liability) or LPs (which expose the general partner to unlimited liability).

Learn more about LLC formation for joint ventures or contact us to discuss your specific venture.

Choosing a partnership type depends on three key factors: liability exposure, who manages the business, and tax efficiency.

• General partnership. Simplest and least expensive to form, but all partners face unlimited personal liability for partnership debts. Rarely the best choice for established businesses. If you already operate as a GP, consider registering as an LLP for liability protection without restructuring.
• Limited partnership. Ideal when you need capital from investors who want a passive role without management responsibility. Works well for ventures with clear separation between managing partners and investor partners – particularly real estate, oil and gas, and development projects. The tradeoff: general partners carry unlimited liability, often requiring a separate LLC or corporation to serve as general partner. Advantage: flexible profit allocation that corporations can't match.
• Limited liability partnership. Best for professional service firms – law firms, accounting practices, architecture firms, medical groups – where all owners actively manage the business. Provides full liability protection so one partner's malpractice or error doesn't jeopardize other partners' personal assets while preserving partnership tax and management benefits.
• Limited liability limited partnership. Combines the LP structure (suited for passive investors) with full liability protection for all partners, including general partners. Eliminates the need for a separate entity as general partner, reducing complexity and cost. Strong fit for professional partnerships or investment structures seeking maximum liability protection. 

Comparing partnerships to other structures? Read our guide to Texas business entity types to compare partnerships to LLCs and corporations.

Federal Income Tax

All Texas partnership types – GPs, LPs, LLPs, and LLLPs – are treated as partnerships for federal income tax purposes. The partnership files an annual information return (Form 1065) but doesn't pay federal income tax. Instead, profits and losses pass through to partners, who pay tax on their individual share in their personal tax returns.

General partners pay self-employment tax on their share of partnership income from business operations. Limited partners are generally exempt from self-employment tax on LP distributions, but guaranteed payments for services are taxable.

Texas Franchise Tax

Texas imposes a franchise tax on most taxable entities doing business in the state. However, there are key exemptions:

General partnerships are exempt from franchise tax if:

• They're owned entirely by individuals (no entity owners); and
• They haven't registered as an LLP.

Any partnership (GP or LP) is exempt if it qualifies as a "passive entity" – meaning it derives at least 90% of its gross income from passive sources (dividends, interest, capital gains, royalties, mineral income, etc.) and receives less than 10% from active business operations.

Limited partnerships, LLPs, and LLLPs are generally subject to Texas franchise tax as taxable entities unless they meet the passive entity exemption above.

Forming a Texas partnership involves choosing the right structure, drafting an agreement, and filing the proper documents – and doing it correctly matters. We've formed hundreds of Texas businesses in the past five years alone, and our experience guides every step.

Here's what we can handle for you:

• Choosing the right structure. We discuss your business goals, liability concerns, and management preferences to recommend the partnership type that fits.
• Drafting the partnership agreement. A written partnership agreement is essential – it defines how your partnership operates and prevents costly disputes later. We draft comprehensive agreements that address ownership structure, management authority, profit allocation, partner transitions and buyouts, and dispute resolution. 
• Handling state registration and filings. We complete and submit all filings with the Texas Secretary of State, including certificates of formation for limited partnerships and registration applications for LLPs and LLLPs. Our team obtains your federal employer identification number, ensures your partnership name meets state requirements, and tracks renewal deadlines so your liability protection and good standing never lapse. Filing fees are included in our services.
• Serve as your registered agent. We serve as your registered agent – receiving legal documents on your partnership's behalf and maintaining your registered office in Texas. This ongoing service is included in your initial formation fee.

We draft comprehensive partnership agreements that address the terms partners typically fight about. Learn more about partnership agreements and how they prevent costly conflicts.

We form partnerships and handle their disputes in court. That dual expertise shapes how we structure your formation – we know which gaps in planning and documentation become lawsuits and build protections into your process from the start. 

We explain every step of your partnership formation in plain English and quote our fee upfront – no surprises.

Call (713) 783-3110 or contact us online to discuss which partnership structure works for your business and get pricing for our formation services.

Do I need to file anything to form a general partnership in Texas?

No. A general partnership forms automatically when two or more people carry on a for-profit business as co-owners, even without a filing or a written agreement. However, because every partner is personally liable for the partnership's debts, a written partnership agreement and a decision about liability protection are worth addressing early.

Does an LLP protect me from my own mistakes?

No. An LLP protects partners from liability for the partnership's obligations, including other partners' professional mistakes. It does not protect you from liability for your own conduct or from a personal guaranty you sign.

Can a limited partner help run the business?

A limited partner can work for the partnership, consult with the general partner, vote on major decisions, and serve as an officer or director of a corporate general partner without losing liability protection. However, taking part in actual day-to-day control of the business beyond these safe harbor activities can expose a limited partner to liability.

What happens if my LLP misses its annual report?

If the report or fee is not filed by May 31 of the year after it was due, the Secretary of State automatically terminates the LLP registration. This removes the liability shield. However, the partnership can apply for reinstatement within three years, and an approved reinstatement relates back to the termination date – restoring liability protection retroactively to the date it lapsed.

Does a limited partnership need a partnership agreement?

Technically, a limited partnership can operate under an oral, written, or implied agreement. However, a written partnership agreement is essential. Texas law makes key terms – including contribution promises, withdrawal rights, and distributions – dependent on what's documented in the partnership agreement. Without a clear written agreement, disputes arise. We strongly recommend putting your LP agreement in writing to avoid problems later.

Start Your Texas Partnership on the Right Foundation

The structure you choose determines who manages the business, who is personally at risk, and what happens when a partner wants out. Settling those questions at formation is far simpler than sorting them out in a dispute. 

Hendershot Cowart P.C. helps Texas partners form the right entity, draft an agreement that reflects their deal, and keep their liability protection in place.

Call (713) 783-3110 or contact us online to talk with our Texas partnership formation attorneys.