Partnerships are considered legal entities separate and apart from the individual members.
A general or limited partnership is similar to a corporation; both entity types may own property and engage in business and both are responsible for their debts. While corporations are legal entities composed of individual stockholders, partnerships are legal entities composed of individual members. The members of a partnership may be individual persons or other legal entities such as a partnership or corporation.
A limited partnership (LP) or limited liability partnership (LLP), registered with the Secretary of State (SOS), may add or remove a partner without terminating itself or organizing a new partnership as an entity.
By contrast, unless there is a partnership agreement that indicates otherwise, a general partnership is presumed to have terminated the old partnership and established a new partnership when a change in members occurs.
The taxability of these events in relation to motor vehicles is described in the sections below.
When a partner transfers a motor vehicle to a partnership upon formation/organization of the partnership, the following guidelines apply:
When a partner transfers a motor vehicle to an existing partnership, regardless of whether the partnership pays consideration, motor vehicle tax is due. SPV procedures may apply.
When a partnership dissolves/terminates and transfers a motor vehicle to an individual partner as a portion of the assets, the following guidelines apply:
When a partner joins or leaves a partnership and the partnership entity remains intact, the following guidelines apply:
If the change of partner(s) causes the partnership entity to dissolve/terminate, the two above guidelines do not apply. For example, a general partnership without a partnership agreement that provides for the continuation of the partnership entity upon a change of partner(s) automatically dissolves. See Transfers Upon Dissolution/Termination of a Partnership on this page. If a new partnership entity is then formed/organized, see Transfers to Newly Formed/Organized Partnership on this page.
When a partnership incorporates and transfers a motor vehicle from the partnership name to the corporate name in connection with that incorporation, the following guidelines apply:
When a partnership converts to a different entity type, no motor vehicle tax is due on motor vehicles transferred to the resulting entity following the conversion. In a conversion, which is an operation of law, transfer of liens with motor vehicles does not constitute consideration since the conversion, by statute, is not a sale; therefore, no taxable event has occurred. A certificate of conversion issued by the SOS is evidence of a conversion.
Any motor vehicle transfer involving the assumption of a lien is subject to motor vehicle tax and SPV procedures may apply.
When a partnership enters Texas for the first time to establish residency and begins doing business, the partnership qualifies as a new resident.
To qualify as a new resident, the partnership cannot be presently doing business in Texas or already be domiciled in Texas.
When a partnership brings a motor vehicle into Texas as a new resident, the following guidelines apply: