1. CHAPTER 5 LIMITED LIABILITY PARTNERSHIPS AND
LIMITED LIABILITY LIMITED PARTNERSHIPS
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2. Introduction to Limited Liability Partnerships
First LLP statutes in the United States were adopted in the early 1990s.
LLPs were conceived to limit the personal liability of professionals who have traditionally done business as partnerships.
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3. Law Governing Limited Liability Partnerships
STATE STATUTE PROVISIONS GOVERNING LIMITED LIABILITY PARTNERSHIPS
The nature & extent of the personal liability of the partners
Voting requirements to elect limited liability partnership status
Requirements for filing a statement of qualification to become a limited liability partnership
The annual reporting requirements for limited liability partnerships
Liability insurance or segregated funds requirements (in certain states)
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4. Limitations on Personal Liability
PARTIAL SHIELD STATUTES
FULL SHIELD STATUTES
Partners do not have personal liability for partnership obligations arising from the wrongdoing of other partners; however, they remain personally liable for all other partnership obligations.
Partners are not personally liable, solely by reason of being a partner, for any obligation of the partnership incurred while the partnership is an LLP.
Obligations of the partnership belong solely to the partnership.
Partners usually remain liable for obligations arising in whole or in part due to their own negligence, wrongful acts, errors, or omissions.
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5. Formation and Operation of the Limited Liability Partnership
Voting
Partners must vote to adopt limited liability partnership status pursuant to state statutes.
Annual reporting requirements
Most states require limited liability partnerships to file annual reports to maintain their good standing and their limited liability status.
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6. Formation and Operation of the Limited Liability Partnership
STATEMENT OF QUALIFICATION
A statement of qualification must be filed,
including:
Partnership name
Partnership address
Partnership agent (if required)
Statement that the partnership elects limited liability limited partnership status
Deferred effective date (if any)
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7. Formation and Operation of the Limited Liability Partnership
LIMITED LIABILITY PARTNERSHIP AGREEMENT
Very similar to partnership agreement for general partnership
More detail concerning partner liability
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8. © 2013 Delmar Cengage Learning
Advantages & Disadvantages of Doing Business as a Limited Liability Partnership
ADVANTAGES
DISADVANTAGES
Limited liability for all partners
Flow-through income tax benefits
Transferability of partnership interest
Business continuity
Diversified capital resources
Personal liability for certain obligations
Subject to state income taxation in some states
Formalities and regulatory & reporting requirements
Legal and organizational expense
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9. Introduction to Limited Liability Limited Partnerships
As of late 2011, over half of the states have statutes for limited liability limited partnerships.
Laws governing limited liability limited partnerships
State limited partnership act or state limited liability partnership act
Limited liability limited partnership agreement
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Partner Liability
PARTNER LIABILITY
Personal liability for general partners may be limited in the LLLP agreement to the extent permitted by law.
General partners of a limited liability limited partnership are usually granted the same limited liability protection as limited partners in their state.
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11. Limited Partner Liability
Personal liability for limited partners may be limited in the LLLP agreement to the extent permitted by law.
State laws concerning liability for limited partners of LLLPs may be either full shield or partial shield.
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12. Formation and Operation of the Limited Liability Limited Partnership
LIMITED LIABILITY LIMITED PARTNERSHIP ELECTION AND FORMATION
Limited partnerships elect to become limited liability limited partnerships by vote of the partners and filing proper document with state authority.
In states that follow the ULPA (2001), the limited partnership may indicate in its certificate of limited partnership whether it opts for limited liability limited partnership status.
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13. VOTING AND ANNUAL REPORTING REQUIREMENTS
Formation and Operation of the Limited Liability Limited Partnership
VOTING AND ANNUAL REPORTING REQUIREMENTS
Voting requirements to elect LLLP status are set by state statute.
Generally subject to the same annual reporting requirements as limited partnerships
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14. Limited liability limited partnership
Formation and Operation of the Limited Liability Limited Partnership
Limited liability limited partnership
Similar to agreement of limited partnership
Includes additional language concerning limited liability of the partners
Foreign limited liability limited partnerships
The LLLP must file a statement of foreign qualification with the designated state official of any foreign state in which it transacts business.
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15. © 2013 Delmar Cengage Learning
Advantages and Disadvantages of Doing Business as a Limited Liability Limited Partnership
ADVANTAGES
DISADVANTAGES
Limited liability for all partners, including general partners
Organization and management formalities to maintain limited liability status
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16. TASKS PERFORMED BY PARALEGALS WORKING WITH LLPS AND LLLPS
The Paralegal’s Role
TASKS PERFORMED BY PARALEGALS WORKING WITH LLPS AND LLLPS
Research state statutes to determine requirements for forming an LLP or an LLLP
Draft documentation evidencing the vote of partners to elect limited liability status
Draft statements of qualification or certificate of limited partnership
Draft LLP or LLLP agreements
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