Limited Liability Partnership
Although found in many business fields, the limited liability partnership is an especially popular form of organization among professionals, particularly lawyers, accountants and architects. In some U.S. states (including California and New York), LLPs can only be formed for such professional uses. A limited liability partnership (LLP) has elements of partnerships and corporations. In an LLP, all partners have a form of limited liability, similar to that of the shareholders of a corporation. However, the partners have the right to manage the business directly, and (in many areas) a different level of tax liability than in a corporation.
Limited Liability Partnerships vs. Limited Partnerships
Limited liability partnerships are distinct from limited partnerships, in that limited liability is granted to all partners, not to a subset of non-managing "limited partners." As a result the LLP is more suited for businesses where all investors wish to take an active role in management. The laws regulating LLP's vary from state to state, and in California, only attorneys, accountants, and architects may form a limited liability partnership, and therefore use of this form of business entity is very restrictive. Like the other forms of partnerships, the business does not pay taxes on its profits but the partners are responsible for reporting any business profits or losses on their personal income tax returns. Because the profits of an LLP are distributed among the partners for tax purposes, the business avoids the problem of "double taxation" often found in corporations.
Uniform Partnership Act
In the United States, each individual state has its own law governing their formation. Limited liability partnerships emerged in the early 1990s: while only two states allowed LLPs in 1992, over forty had adopted LLP statutes by the time LLPs were added to the Uniform Partnership Act in 1996. Unike general partnerships, however, LLPs are usually required to register with the secretary of state in which it was formed, and any other states where it transacts business.
California Governance
In California, general provisions governing limited liability partnerships are found in the California Corporations Code, Sections 16951 et seq. Limited liability partnerships may only be formed by licensed persons for the practices of public accountancy, law or architecture.
How We Serve Our Clients
With our experience working with entrepeneurs to establish new businesses we will guide you through the process of forming a new company, assisting you in choosing the appropriate legal structure and explaining the advantages of each for your particular enterprise. After the business is established, our attorneys will be at your disposal to answer general legal questions when they arise. Our clients also call on us to assist them during transitional periods, raising capital, locating venture partners, merging, selling, and closing a business.
