Limited Liability Partnership is a legal business form wherein the personal liability of all partners is limited for any act of the partnership whether in tort or contract unlike that of a general partnership where all partners equally and individually liable for the partnership’s obligations. Even if the general partnership is governed by a partnership agreement that specifies differential partnership interest, all partners are equally responsible and liable for the partnership’s business activities and debts.
Although all the states have adopted the Revised Uniform Partnership act, there are variances in the statute as passed by various states. Some states give the limited liability shield to partners only in negligence cases and not in contract or tort. Limited Liability partnerships are preferred by professional organizations as it provides the limited liability feature of a corporation and flexibility of operations as in a partnership. In a limited liability partnership, claims due to negligence, misconduct or breach of contract by one partner does not affect the personal assets of other partners. This protection does not extend to the partner whose misconduct or negligence instigated the claim. In some states only professional organisations such as lawyers or accountants can form limited liability partnership.
The framework of Partnership laws in each state is based on the Revised Uniform Partnership Act which all states have adopted. Formation of Limited Liability partnership may differ from state to state. In all states a certificate of registration is required to register a limited liability partnership. The application for registration of LLP must disclose the names and addresses of all partners, the Doing Business As name and the principle place of business, purpose of the LLP etc among other things. Some states stipulate that the LLP has a minimum capital infusion during formation and buy enough insurance coverage to face any eventualities.
You can convert your existing general partnership or limited partnership to limited liability partnership by filing a change request with the state. If you have an existing partnership agreement, no major changes are required to it unless you want to change existing partner’s rights and responsibilities. You have to add the words ‘Registered Limited Liability Partnership’ or ‘Limited Liability Partnership’ or an abbreviation such as LLP or RLLP to the name of your firm. You have to pay a filing fee to register the LLP with the state. This again varies from state to state. Some states charge filing fees according to the number of partners.
