Although the partnership itself is not a taxable entity, it must file an annual federal and state “information” return with the Internal Revenue Service and the Minnesota Department of Revenue. For this reason, both federal and state tax identification numbers must be obtained by the partnership. A partnership that will be selling a product or service that is subject to sales tax also will need to register for purposes of Minnesota sales and use tax. A partnership that will hire employees, even if those employees are members of a partner’s family, must secure workers’ compensation insurance covering employees. These taxes and procedures for obtaining tax numbers are discussed in the section of this Guide on business taxes. Partnerships that will be hiring employees also should review the section of this Guide on issues for employers. Registration of Domestic and Foreign Limited Liability Partnerships In order to become a limited liability partnership, a Minnesota general partnership must file a registration to that effect. A form, Minnesota Limited Liability Partnership Statement of Qualification, that includes the specifically required language is available from the Secretary of State at Minnesota Limited Liability Partnership Forms. Also available by mail from that office. The partnership is subject to limited liability partnership rules of law on and after the date the registration is filed. That registration is valid indefinitely as long as the annual registration for the partnership is filed on a calendar year basis. Non-Minnesota limited liability partnerships must similarly register with the Secretary of State a Foreign Limited Liability Partnership Statement of Qualification, available at Foreign Limited Liability Partnership Forms, and must attach to the registration a certificate of good standing or status from the state or province where the foreign limited liability partnership is formed. The Partnership Agreement The partnership agreement addresses a number of issues relating to the management and operation of the partnership. In drawing up the partnership agreement, the prospective partners should consult with legal counsel to assure that the needs and desires of the partners and relevant legal issues are addressed. Some of the issues typically addressed in a partnership agreement include: • Name of the partnership. • Duration of the partnership. • Location of its place of business. • Capital contribution of each partner. • Whether partners may make additional contributions. • The level at which capital accounts of the partners must be maintained.
• Participation of each partner in profits and losses. • The amounts of any regular drawings against profits.
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