Frequently Asked Questions
Q. What is a limited liability partnership (LLP)?
A. A limited liability partnership is similar to a limited liability company (LLC) in that all partners have limited liability for business debts, but in many states this liability protection is less than what LLCs receive. Further, some states limit the use of limited liability partnerships to professionals, those occupations that require a license to do business.
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Q. When is the limited liability partnership (LLP) entity-type most commonly used?
A. The limited liability partnership structure is especially appealing to types of businesses that were prohibited in the past from forming a limited liability company (LLC) or corporation, such as accountants and attorneys. The costs of transferring those existing general partnerships to an LLC or corporation now, where it is allowed, can be very costly.
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Q. How are limited liability partnerships (LLPs) taxed?
A. Limited liability partnerships allow for pass-through taxation as its income is not taxed at the entity level; however, a tax return for the partnership must be completed. Any income or loss of the limited liability partnership as shown on the return is passed-through to the partners’ individual tax returns. The partners, must then report the income or loss on their individual tax returns and pay any necessary tax.
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Q. How many owners are required to form a limited liability partnership (LLP)?
A. A limited liability partnership requires two or more owners.
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Q. Are there any other requirements for limited liability partnerships (LLPs)?
A. Limited liability partnership requirements vary by state.
California and New York limit the use of limited liability partnerships to professionals. In California, the term professionals is defined narrowly to include only lawyers, accountants or architects.
Delaware, Georgia, Pennsylvania, Texas, and Virginia require a limited liability partnership to carry insurance or an escrow account to cover liabilities.
Several states have a reduced form of liability protection referred to as limited shield: Alaska, Arkansas, District of Columbia, Hawaii, Illinois, Kansas, Kentucky, Louisiana, Maine, Michigan, Nevada, New Hampshire, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah and West Virginia.
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Q. Do I need an attorney to form a limited liability partnership (LLP)?
A. No, an attorney is not a legal requirement. You can prepare and file the registration of limited liability partnership yourself; however, you should understand the requirements of your intended state of formation.
You can use BizFilings' service to form your limited liability partnership and save money on attorney's fees. However, if you are unsure of what entity type would be most beneficial to your business, consult an attorney or accountant.
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Q. What should I name my limited liability partnership (LLP)?
A. Choose the name of your limited liability partnership carefully. It is very important that your name portray the image you want for your partnership. Legally, the name you select must not be "deceptively similar" to any existing company or must be "distinguishable on the record" of your state.
Because some states only check proposed limited liability partnership names against existing limited liability partnerships, reserved and active, it is highly recommended that you perform a trademark search to make sure the name you want to use is not already taken by another entity type.
Additionally, most states require that the name you select show your business is a limited liability partnership, by including the words "Limited Liability Partnership" or the abbreviation of "LLP."
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Q. How do I get started setting up a limited liability partnership (LLP)?
A. After you decide to form a limited liability partnership, a registration of limited liability partnership must be filed with that state and initial fees must be paid. If you choose BizFilings to form your limited liability partnership, we will complete these administrative tasks quickly and effectively.
After your registration of limited liability partnership is filed, your limited liability partnership should have an organizational meeting where an operating/partnership agreement is adopted, partnership certificates are distributed and other preliminary matters are completed.
BizFilings' Limited Liability Partnership Kit includes all the information and paperwork to make this process easier.
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