Limited Liability Partnership LLP
Florida Limited Liability Partnership LLP is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit elements of partnerships and corporations. Each partner is not responsible or liable for another partner’s misconduct or negligence. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Unlike corporate shareholders, the partners have the right to manage the business directly. In contrast, corporate shareholders must elect a board of directors under the laws of various state charters. The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as “corporate” individuals the legal responsibility to manage the corporation in the corporation’s best interest. An LLP also contains a different level of tax liability from that of a corporation.
- A Florida LLP is a business partnership in which some or all partners have limited liability.
- The reason for this type of business is that one partner is not liable for another partner’s misconduct or bad business practices.
- In this type of business, the partners are much like shareholders in a corporation except that they can run the business directly.
- Another huge advantage of limited liability partnerships is the tax treatment under Subchapter K of the internal revenue code.
- An LLP is not subject to direct taxation as corporations are.
Why form an LLP over an LLC?
While and LLP is very similar to an LCC, there are separate advantages to forming a Florida limited liability partnership over a corporation. Not all partners are held personally responsible for the debts and liabilities of the business, only the partner causing the problem is held liable. A Florida LLP allows more flexibility in structuring the management with less formal requirements and annual paperwork.
Both profits and losses are passed through directly to the partners as spelled out in the partnership agreement, eliminating what is often called double taxation that corporations can face.
It is easier to convert from a general partnership to an LLP over an LLC. Generally speaking, LLPs are used for businesses rendering professional services such as dentists, attorneys, accountants, architects, and others as listed under Florida law.
Florida Limited Liability Partnership LLP Disadvantages
The only disadvantages to a LLP are that partners can commit the partnership to formal business agreements without the consent of other partners. Also, any money and property contributed to the Limited Liability Partnership LLP becomes owned by the partnership as a whole rather than the individual contributions. Even though these disadvantages exist, partners working closely together and well-defined partnership agreements can eliminate them.
How does Limited Liability Partnership LLP differ from Limited Partnerships?
Limited Liability Partnership LLP differs legally from limited partnerships in that limited liability is granted to all partners, rather than just a subset of non-managing “limited partners.” This is why LLP is more suited for businesses where all investors want to take an active role in managing the business. There are effectively no limited or inactive partners in the Limited Liability Partnership LLP. In a limited partnership, there is at least one limited partner and one general partner.
A limited partner contributes financially to the business but only has minimal control over business decisions and operations. This means a limited partner is shielded from business liabilities, but they may still lose their business investment.
How to File a Florida LLP?
The formation of an LLP is done by filing forms with the Florida Department of State Division of Corporations. In most cases, this formation is the conversion of an existing partnership into a legally formed LLP. Since it is a partnership, it must have at least two or more owners to be able to qualify. Title XXXVI Chapter 620 of Florida statutes covers partnership laws and section 620.9001 begins Florida law covering LLP.
Once a partnership votes on the change to an LLP and agrees to amend the partnership agreement, the partnership can file a statement of qualification. This statement contains the name of a limited liability partnership and must end with the words “Registered Limited Liability Partnership,” “Limited Liability Partnership,” R.L.L.P., L.L.P., RLLP, or LLP. It also must contain the street address of the partnership’s chief executive officer and, if different, the street address where the partnership is located.
Additionally, it must state that the partnership elects to be a limited liability partnership and an effective date. The only cost associated with creation is the state filing fee.