A partnership is an association of two or more people who operate as co-owners of a business for profit. In Florida, as in all other states, a limited liability partnership (LLP) is a business form in which the partners receive legal protection from personal liability for the obligations and liabilities of the LLP and the other partners.
All of the limited partners in a Florida limited liability partnership may participate in the management of the partnership. The statute of each state specifies who is permitted to form an LLP and the process for forming one. This is true in Florida as well.
Under Florida statutes, a partnership or limited partnership can become an LLP by filing a statement of qualification with the Florida Department of State. A statement of qualification is required by statute to contain the following information:
- The name of the partnership as identified in the records of the Florida Department of State;
- The street address of the partnership’s chief executive office and, if different, the street address of its principal office in the state of Florida, if there is one;
- The name and street address of the partnership’s agent for service of process, who must be an individual resident of this state or another person authorized to do business in this state;
- A statement that the partnership elects to be a limited liability partnership; and
- A deferred effective date, if there is one.
What Are the Advantages of a Limited Liability Partnership?
An LLP offers advantages to business partners, including personal liability protection and tax advantages. Perhaps most importantly, the partners in an LLP generally are not personally liable for partnership obligations. This would include protection from contract and tort claim liability, such as those enjoyed by the shareholders of a corporation. It is what may make an LLP preferable to a general partnership or limited partnership where there may be liability of partners in certain situations.
There is also a significant tax advantage to an LLP, and it is that the LLP passes through its income to the partners without taxation at the partnership level. The tax on its income is paid by the individual partners.
Can Anyone Form a Limited Liability Partnership?
LLPs tend to be favored by professionals, including lawyers, doctors, engineers, and accountants. With this business structure, the partners can avoid liability for the negligence or misconduct of other partners. Basically, partners in any type of business can form an LLP if that is the business structure they prefer for their operation.
Because LLPs are general partnerships with limited liability status, they are run like general partnerships. LLPs have the same flexibility of control related to income, losses, and gains passing through to the partners pursuant to their partnership agreement.
In addition to meeting the legal requirements for the formation of an LLP, it is recommended that the partners in an LLP prepare a written partnership agreement to govern their relationship and the management of the LLP.
A useful partnership agreement would describe the role of each partner in the LLP. It would detail each partner’s rights and obligations with respect to the partnership. It would also address the following issues:
- The business purpose of the partnership;
- The percentage ownership interest of each partner in the partnership;
- The procedure for adding new partners;
- Which partner(s) have the authority to make business decisions on behalf of the partnership;
- The procedures that the partners may use to resolve disputes, e.g., alternative dispute resolution methods;
- How the partnership can be dissolved or transferred;
- How one partner can exit or transfer their interest in the LLP;
- Any other policies or procedures that the partners have in place for making major decisions or handling important aspects of the partnership’s business.
What Type of Liability Protection Does a Limited Liability Partnership Offer?
As noted above, the liability of partners in LLPs is limited with respect to the negligence or misconduct of the other partners.
In addition, LLP partners are not personally liable for partnership obligations. This includes protection from liability rooted in contract and tort liability, and it makes LLP partners similar to the shareholders of a corporation.
How Is a Limited Liability Partnership Created?
Again, in Florida, as in most states, to form an LLP, the partners must fill out a registration form and file it with the Secretary of State. Registration may also require the partners to put other provisions in writing, including the partner’s:
- Financial contributions;
- Debt distributions.
What Are the Requirements for an LLP in Florida?
Florida law states the requirements for forming an LLP in the state as follows:
- Naming the business based on the state law for naming an LLP;
- Filing a Statement of Qualification with the Florida Department of State Division of Corporations;
- Choosing a Florida resident as the agent for service of process and notices from the Florida Secretary of State;
- Obtaining an Employment Identification Number (“EIN”);
- Having at least two partners; and
- Filing an annual report to maintain the business’ status as an LLP.
The name of the LLP must follow Florida specifications, so it must end with one of the following abbreviations or phrases:
- Registered Limited Liability Partnership;
- Limited Liability Partnership;
- RLLP; or
What Paperwork Do I Need to Form an LLP in Florida?
The Statement of Qualification (“SOQ”) can be downloaded from the Florida Division Corporations website. After the form is completed, it can be filed with the Florida Division of Corporations.
As noted above, the LLP’s SOQ must contain the following:
- The name of the LLP;
- The street address of the LLP business office;
- If it is different for the business office, provide the street address of its principal office in Florida, if there is one;
- The name and street address of the registered agent for service of process;
- A statement that the partnership chooses to be an LLP; and
- The date the business becomes an LLP if it is a date later than the filing date.
What Advantages Are There to LLPs in Florida?
Under Florida law, limited liability partnerships enjoy numerous benefits, including:
- LLPs pass their profits as well as losses through to the partners for tax purposes;
- Partners pay their LLP tax obligations based on their share in the LLP;
- Partners are not personally responsible for liability arising from the misconduct of another partner;
- The personal assets of each partner are protected from liability for the misconduct and legal faults of the LLP;
- A partner is personally responsible for any liability or debt they cause the LLP; and
- A partner cannot be held personally responsible for the faults of the LLP just because they are a partner.
What Disadvantages Are There to an LLP Structure in Florida?
In Florida, LLPs are required to file their annual reports by May 1 of each year. The information on these reports updates the current data which is on file regarding the LLP. The annual report must list the following:
- The name of the LLP;
- The current address of the LLP;
- The Employment Identification Number of the LLP.
When a person forms an LLP, the first annual report is due in May of the following year after the business becomes an LLP. For example, if the LLP was formed in March 2021, the first annual report would be due by May 2022.
An LLP can submit the annual report by mail or on the website of the Florida Department of State, Division of Corporations. The consequences for not filing an annual report in Florida include:
- Cancellation of the LLP’s Statement of Qualification;
- Loss of status as an LLP.
Other disadvantages of an LLP in Florida include the following:
- One partner is able to bind the LLP to a business agreement without the permission of the other partners;
- When one partner contributes property or money to the LLP, the ownership of the money property transfers to the LLP.
Do I Need the Help of a Lawyer for My LLP Issue?
It is in your best interests to consult with a Florida corporate lawyer for any issues, questions, or concerns you may have related to forming a limited liability partnership in Florida. An experienced corporate lawyer can advise you regarding the laws in Florida that apply to your business.
An experienced corporate lawyer can also explain your rights and obligations in the limited liability partnership and assist you with completing and filing the required forms. They can also help you draft a unique partnership agreement that best serves the interests of your business.