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Limited Liability Partnership Templates

 

What is a limited liability partnership? Basically, it is a type of partnership that provides each individual partners protection against personal liability for certain partnership obligations.

This is a distinction that other partnerships don’t necessarily share by default, and can later on become legal entanglements for them. For this reason, a limited liability partnership is the choice of many savvy businesses these days.

This type of a partnership is fundamentally the same as a most general partnership, with one very important difference. Unlike a general partnership, in which individual partners are liable for the partnership’s debts and obligations, a limited liability partnership (aka LLP) provides each of its individual partner’s protection against personal liability for certain partnership liabilities. To what extent do these limitations go? That depends on the state, as each state’s laws for LLP’s are a little bit different.

The boundary of an individual partner’s liability mostly depends on the scope of the particular state’s LLP laws in force. Many states provide protection only against tort claims (lawsuit for damages) and do not extend protection to a partner’s individual negligence or incompetence, or to the partner’s involvement in supervising wrongful conduct.

Some other states provide a broader protection, including protection against contractual claims brought by the partnership’s creditors. For example, Minnesota enacted an expansive LLP statute in 1994 which provided that a partner in an LLP was not liable to a creditor or for any obligation of the partnership. It further provided that a partner was personally liable to the partnership and co-partners for any breach of duty. Not only that, it also allowed a creditor or other claimant to pierce the limited liability shield of a partner in the same way a claimant may pierce the corporate veil of a corporation and personally sue an individual member of the corporation.

A partnership that provides specific professional services may form an LLP and then register as a professional limited liability partnership (PLLP). A PLLP is normally the same as an LLP except that it is an association solely of professionals. Each state specifies the qualifying professions for a PLLP. This business form is typically available to physicians, architects, dentists, engineers, and accountants.

What is the role of a “limited partner”?

Don’t confuse a limited liability partnership with a “limited partnership”, which is a type of partnership where at least one of the partners has a limited role in the partnership. The general partner has the same role as in a general partnership: controlling the company’s day-to-day operations and being personally liable for business debts. The limited partner would not be involved in daily operations, but have some role in decisions, depending on the partnership agreement most likely conveyed at the commencement of their business.

Limited Liability Partnership Explained

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