Partnerships are one of the most commonly formed business entities. Unlike a general partnership, partners in a limited liability partnership (LLP) are not personally liable for some of the business’ financial obligations. Professional service firms (such as law and accounting firms) frequently forms as LLPs. However, in Louisiana, any business can register as an LLP.
The process of forming a limited liability partnership varies from state to state. In Louisiana, the Secretary of State is responsible for the registration of limited liability partnerships.
- What are the Requirements for a Limited Liability Partnership in Louisiana?
- What Paperwork Do I Need to Form a Limited Liability Partnership?
- What Benefits Does Louisiana Give to a Limited Liability Partnership?
- What Disadvantages Does Louisiana Give to a Limited Liability Partnership?
- Should I Hire a Business Lawyer?
Unlike some states, any business can become an LLP (technically referred to as a registered limited liability partnership or RLLP) in Louisiana. However, you must have at least two partners (a sole proprietor cannot form an LLP) and must renew your registration annually. Unlike most states, Louisiana LLPs do not have to designate a registered agent.
If your partnership operates under an assumed name (something other than the partners’ surnames), you must register the business’ name with the state. Additionally, you must designate your business’ limited liability partnership status by putting “LLP” or “RLLP” after its name.
To create a limited liability partnership, you must file an Application for Registration of a Registered Limited Liability Partnership with the Secretary of State. This form can be submitted either online or by mail.
You must provide the following information on your Application for Registration:
- The name of your partnership,
- Your partnership’s previous name (if applicable),
- Whether your LLP has a partnership agreement on file with the Secretary of State,
- The business’ primary street address,
- The type of business you operate,
- Your number of partners,
- The names and addresses of at least two partners, and
- The signature of at least one partner.
You may have to file additional paperwork if you plan on operating your business under an assumed name.
In addition to your state filing, you should consider drafting a partnership agreement. A partnership agreement defines the rights and responsibilities of your partners. For example, a partnership agreement may set out the procedures for distributing profits, adding partners, or terminating the partnership. Having a written partnership agreement can prevent extended litigation if a dispute occurs.
Limited liability partnerships have specific benefits. First, an LLP does not have to pay income taxes. Instead, its income passes through to its partners (who must report this income to the IRS and pay taxes).
And, partners may not be personally liable for the other partners’ negligence and misconduct. In other words, you may not be financially responsible if another partner is sued for malpractice or other wrongful acts.
Louisiana does not protect LLP partners from all business liabilities. Unlike many states, you may still be responsible for the many of the business’ debts and financial obligations. You are only protected against debts and judgments arising from another partner’s negligence or misconduct.
This means that a partner’s personal assets can be seized to collect a debt or judgment against the LP. If you form a limited liability partnership, partners should seriously consider purchasing liability insurance to help offset this risk.
If you are concerned about liability, consider creating a limited liability company (LLC) or S corporation instead. These business entities may offer owners additional protection. However, different rules and procedures apply to LLCs and corporations in Louisiana. A business lawyer can help you decide which business structure is best for you.
While completing a form is a simple process, a lot more goes into the structuring of a limited liability partnership. For example, you should create a legally binding partnership agreement, should evaluate liability insurance policies, and may have ongoing legal obligations. A business lawyer can help you follow the correct procedures and protect your financial interests.