Business Entities at the State Level: Limited Liability Partnerships
The next topic of discussion for business entities at the state level are limited liability partnerships (LLPs). We will discuss what an LLP is, how it works, and who would benefit most from filing their business as an LLP. The limited liability partnership is very similar to general and limited partnerships, however there are a few large differences.
Within a limited liability partnership, each partner’s liability is limited to their contribution to the business; there are no designations between partners. Furthermore, since there is no distinction between partners, often times each partner gets one vote unless otherwise outlined in the required partnership agreement. While the partners are limited to their contributions, their liability is also limited in that they will not be held liable personally, only professionally with regards to their assets within the partnership.
LLPs are quite popular in law firms and accounting firms because of the flexibility afforded. Since partners are only liable for their investment, they can easily be added or removed from the LLP. A term often associated with LLPs is a “junior partner”. These individuals are not partners despite the nomenclature; they are salary employees who will (hopefully) one day make their way to partner. Similar to other partnerships, LLPs are “flow-through” entities and pay taxes accordingly.
A limited liability partnership can be filed with a respective Secretary of State. If you have any other questions about whether filing a limited liability partnership is right for you, the professionals at The Center for Financial, Legal and Tax Planning are more than well-equipped to answer your questions. Please contact us at (618) 997-3436.