If you and a partner have an idea for a business, the first question that will come up is what type of entity your company will be. For partnerships, one option that many businesses choose is to form an LLP. An LLP provides the opportunity for partners to build and maintain a strong working partnership while also growing their business, and it may be right for you. To learn more about LLPs and your legal options for starting a business with partners, talk to an attorney today.
What is an LLP?
An LLP is a limited liability partnership model of business entity. It is similar to a general partnership agreement while also providing some limited personal liability protection to partners in the business. An LLP must have at least two owners operating as partners, and there can only be a single class of ownership as general partners. The degree of protection varies from state to state, so be sure to review the level of protection your state provides for LLP partners with an attorney. Some states provide the same protection as a corporation, while others only protect against the negligence of another partner.
Advantages of an LLP
There are many advantages to the establishment of an LLP that can help you build and maintain strong working relationships with the other partners in your business. The first advantage is the liability protection for all partners. Partners do not have to worry about being held liable for the negligence of another partner in the business, and it also provides a level of equity so that all partners get a say in how the business operates. Another advantage is the effect on securities law because as general partners, these laws do not affect your business if a change in ownership is made. This can save your business significant time and money if ownership changes hands or if one or more partners choose to leave the company.
How to Create an LLP
In order to create an LLP, you must first choose a name. LLPs are required to have actual, and not fictitious, names along with the LLP in the title. The Secretary of State in your state will be able to tell you if you can form an LLP for your type of business, and you will register your new business with the state. The next step is forming the limited liability partnership agreement, where an experienced attorney can provide significant assistance. This agreement defines each partner’s role and responsibilities as well as the limits of assets and liability protections for each partner. The assets listed in the agreement of each partner may not be used to cover the debts of another partner if that partner is found liable for a negligent or wrongful act.
Call or Contact a Lawyer Today
Establishing an LLP is the first step in creating a strong partnership and a profitable business. Talk to a Counsel for Creators attorney to learn more about LLPs.