A Limited Liability Partnership (LLP) is a business structure that is popular because, just like a corporation, the limited partners have limited personal liability from the claims of the creditors of the LLP. A limited partnership affords more flexibility in the sharing of profits and losses than an s-corporation. It also avoids the double taxation of a c-corporation. The allocation of profits and losses among the partners is in accordance with the partnership agreement. Many states have made LLP's very popular among professionals such as architects, accountants and doctors. This is due to the limited liability afforded innocent partners from the acts of other partners. This comes in handy in malpractice claims. The degree of protection varies from state to state.
Limited Liability partnership formation requires filing the appropriate "Certificate of Limited Liability Partnership" generally with the state and or county agency.
The Certificate of Limited Liability Partnership requirements vary from state to state.
The partnership name must be distinguishable from the name of any other LLC, corporation, limited partnership, or company incorporated, organized or authorized to transact business, in that State. The specific state fees must be paid to the state before the corporate filing will be accepted by that state.
Depending upon the state, there are unique procedures along with accompanying cover letters, and specific documentation to be submitted.
Limited liability Partnerships are not subject to double taxation as are c-corporations. Limited liability partnerships are taxed just like conventional partnerships. The individual partners share of profits and losses are determined by reference to the partnership agreement. The individual share of the partnership profit or loss flows through and each partner. Each partner recognizes their share of the profit or loss on their individual tax return and pays the tax accordingly.