The limited liability partnership (known as a “LLP”) is a business model that allows partners of the LLP to file personal income taxes on the income of the LLP and allows the partners to be protected from the negligent acts of other partners. These benefits make the LLP a preferred business model for professional associations.
Generally, to register as a LLP in Colorado the partners of the LLP must complete a “Statement of Registration” which requires the LLP to provide:
- the name of the LLP
- the LLP’s main office address, and
- the name and address of the LLP’s registered agent.
LLP filing requirements are generally minimal as compared to other business models. However, it is important that these filings are properly done as failing to do so could lead to the loss of the LLP protections.
The filing of all required paperwork can be done with the Colorado Secretary of State. Paperwork for the LLP could include:
- initial registration forms,
- notices of major changes (such as a LLP name change), and
- notice of dissolution.
If you have any questions or concerns about when or how to file paperwork on behalf of your LLP, then you should contact an experienced business lawyer for assistance.
There are two major advantages to the LLP business model. First, partners to the LLP are not personally liable for the negligent acts of other partners. Second, the income of the LLP is taxed only once at the personal level.
This can offer partners more personal and financial security when entering a new venture. Instead of having your personal assets at risk, you are able to create a new business without having to give up any savings or assets in case of liability. You also can avoid paying taxes twice, and instead just pay for the profits of your LLP once in your personal tax bracket. This can save most individuals a great deal of money and avoid having to pay separate business entity taxes.
While partners are generally not personally liable for the negligent acts of other partners, the partners are labile for the normal debts and obligations of the LLP. For example, the partners to the LLP would be liable for any contractual obligations of the LLP. But if the liability came out of another partner acting negligently and hurting the LLP, then the other partners’ assets are safe from the other partner’s negligence.
If you are thinking of forming a LLP, then contact an experienced Colorado corporate lawyer today to discuss your rights and obligations as a partner to a LLP.