Chapter Five

1
Chapter Five

• Limited Liability Partnerships

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Limited Liability Partnership

• Partnership providing protection against
  liability for wrongful conduct of other partners
  formed by compliance with statutes.

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Liability

• Partial shield states states in which partners
  in an LLP retain liability for contractual
  obligations but have no personal liability for
  obligations arising in tort
• Full shield states states in which partners in
  an LLP are fully protected from personal
  liability, whether arising in tort or contract

4
Advantages of LLPs

• The greatest advantage of an LLP is that in all
  states, partners in an LLP are protected against
  unlimited personal liability for negligent acts
  and misconduct of their partners or other
  representatives of the partnership business.

5
When Does the Protection of an LLP Not Exist?

• If a partner supervised or directed the partner
  who committed the act of liability at the time
  the act was committed
• If the partner was directly involved in the act
  giving rise to liability
• If the partner had knowledge or notice of the act
  of liability and failed to prevent or stop it (in
  many states)

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Formation of an LLP

• The following six elements are usually needed
• name of the limited liability partnership
• the addresses of its principal office in the
  state and the agent for service of process
• the number of partners
• a brief statement of the business in which the
  partnership engages
• an application statement
• signature of an authorized partner

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Key Features of Limited Liability Partnerships

• Partners in LLPs have no personal liability in
  any state for wrongful acts of their co-partners.
• In almost all states, called full-shield states,
  LLP partners have no liability either for
  wrongful acts of their co-partners or for
  contractual obligations of the partnership.
• Partners in LLPs retain liability for their own
  wrongful acts and those they direct or supervise.

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Key Features of Limited Liability Partnerships

• LLPs are formed by filing an application with the
  state of formation.
• Identical to general partnerships, the LLP
  agreement may be oral or written in the absence
  of an agreement, profits, losses, management, and
  control are shared equally regardless of capital
  contribution.
• LLPs have the pass-through taxation of general
  partnerships.

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Key Features of Limited Liability Partnerships

• LLPs continue the modern trend of business
  structures that allow their members to manage the
  enterprise and yet be shielded from personal
  liability.