Limited Liability Partnerships (LLPs)

Question 1

Limited Liability Partnership
Number of Co-Owners

Answer 1

Associations of two or more persons as co-owners of a business

Question 2

Limited Liability Partnership
Taxation

Answer 2

Limited Liability Partnerships are treated as General Partnerships for Tax purposes

Income and losses are allocated and passed through to partners
The entity does not pay taxes, but must still file information returns

Question 3

Limited Liability Partnership

Governing Law

Answer 3

Rules governing General Partnerships generally apply to LLPs

The governing law is generally specified in the partnership agreement

The law of the state in which the formal filing is made generally governs the internal affairs of the LLP

Question 4

Limited Liability Partnership

Formation

Answer 4

Unlike a General Partnership, LLPs require formal filing with the Secretary of State

Some states limit use of the LLP to certain professions (such as law or accounting)

Other Requirements:

1. Naming Requirements
2. Foreign LLP Registration
3. State Requirements for Preserving LLP Status

Question 5

Limited Liability Partnership

Naming Requirements

Answer 5

The name of an LLP must contain the words:

“registered limited liability partnership” or “limited liability partnership”; or the abbreviations (RLLP/LLP)

Question 6

Limited Liability Partnership

Preserving LLP Status

Answer 6

Some state impose financial and/or insurance requirements on LLPs to protect injured parties who previously would have been able to recover from all partners

The state may require the LLP file annual or biennial reports

Question 7

Limited Liability Partnership

Foreign LLP Registration

Answer 7

An LLP formed in one state can operate as an LLP in another state, but the LLP must first qualify to do businesses in the other state

Qualifying as a foreign registration generally requires filing with that state.

Question 8

Limited Liability Partnership

Partnership Liability

Answer 8

The partnership, as a separate and distinct legal entity, can sue or be sued

The partnership liable for actionable conduct of a partner acting in the ordinary course of partnership business or with the authority of the partnership.

Question 9

Limited Liability Partnership

Partner Liability

Answer 9

In general, all partners are liable jointly and severally for all the obligations of the partnership

Any or all of the partners may be sued.

Operating as an LLP does not allow a partner to escape liability for their own conduct.

Liability for a Partner’s Conduct Modifications:

• New Partner Liability
• Partial Shield Jurisdictions
• Full Shield Jurisdictions

Question 10

Limited Liability Partnership

New Partner Liability

Answer 10

Persons admitted as partners into existing partnerships are not personally liable for any partnership obligations incurred before they were admitted to the partnership.

Question 11

Limited Liability Partnership

Partial Shield Jurisdiction

Answer 11

In general, partners are not liable for other partners malfeasance

A Partner is liable for:

• Their own malfeasance
• Obligations** of the partnership
• Other Partners’ malfeasant actions if they are directly supervising or controlling that partner

Question 12

Limited Liability Partnership

Full Shield Jurisdiction

Answer 12

Partners are not liable for :

1. Other partners’ malfeasance, generally
2. Obligations of the partnership

A Partner is liable for:

1. Their own malfeasance
2. Other Partners’ malfeasant actions if they are directly supervising or controlling that partner

Question 13

Limited Liability Partnership

End Game of Partners and Partnerships

Answer 13

Dissolution is similar to a general partnership

However, LLPs must renew their applications/certificates annually or they revert to a general partnership.

Question 14

Limited Liability Partnership

Obligations of the Partnership

Answer 14

1. Money Borrowed
2. Contractual Commitments
3. Rent
4. Insurance
5. Etc.