I'm contemplating starting a LP in Illinois where I will be the general partner. I will seek to sell "units" in the LP to friends and family. The Starting Your Business in Illinois document says "Typically, public limited partnerships are sold through brokerage firms for
minimum investments of $5,000.00, whereas private limited partnerships are put together with fewer than 35 limited partners who invest more than $20,000.00 each."
I will not be selling this LP through a brokerage firm but to select friends and family. My question is related to how a private LP is defined.
I will likely have 35 or less investors but their investments will be closer to $1,000 than
$20,000. Also they will not meet the "sophisticated investor" requirements.
I'm a lawyer...the short answer is that if you're not selling to employees and the like, you can either (1) sell securities only to people in one state (and be sure to meet its securities law requirements) or (2) sell to only a few people who don't meet "accredited investor" requirements.
Unless you're selling just to people in one state, you'll need to fit your offering within a Federal securities law exemption. The common one is "Regulation D", and you can usually try to use Rule 504, 505 or 506, all described here:
http://www.sec.gov/info/smallbus/qasbsec.htm#regd I know nothing about Illinois securities laws but you'll also have to comply with them no matter what. Typically as long as you fit within one of the Regulation D exemptions, you just take the "Form D" that you'll need to file with the SEC and file it with Illinois as well and pay a fee. (Definitely see a lawyer- s/he will handle all of this for you.)
Limited Partnerships are not nearly as common as they used to be, having been supplanted largely by Limited Liability Companies, which provide the benefit of limited liability for ALL members. (In an L.P., the General Partner still retains liability for the partnership's activities.)
You definitely need to talk with a lawyer about doing this -- partnerships provide flow-through taxation, which has positives and negatives that are different from what people are used to when they invest in corporations.