A LLP or Limited Liability Partnership is a way of structuring a business that provides limited liability to its members (partners) but also the structural and tax flexibility of a partnership. The limited liability aspect of the LLP protects the assets of its limited partners from the debts, losses, and legal claims related to other individual partners and in many cases the partnership itself. Also, like partnerships, LLPs avoid taxes and organizational requirements associated with corporations.
A LLP can only be formed under state law. As a result, the requirements and protections for LLPs can vary widely from state to state. While there is a lot of flexibility in creating and structuring LLPs in Mississippi, there are a few mandatory requirements:
- Choose a Name for the LLP. This name must be different from all other business names on record at the Mississippi Secretary of State and must include either “Limited Liability Partnership,” “L.L.P.,” or “LLP.”
- Choose a registered agent. Mississippi requires that all LLPs have a registered agent to make sure that any important information or any legal issues will make it to the LLP. A registered agent can be any Mississippi resident or business authorized to do business in Mississippi (must have an address in Mississippi).
- Limited Partnership Formation Forms. The Secretary of State allows you to fill in the required information after registering with their website. The formation forms require the name of the LLP, the principal office of the LLP, the name of the registered agent, the principal office address of the LLP, the signature of 2 partners, and the business address of the registered agent (must be in Mississippi).
- Partnership Agreement Optional. Mississippi does not require a partnership agreement but such an agreement is a good idea to resolve issues such as partner contributions, distribution of profits, partners’ authority, etc.
- Annual Report. Mississippi does not require LLPs to file annual reports.
You can fill out the formational forms required on the Secretary of State website. These forms and the processing fee can be filed directly online or can be delivered to the Secretary of State.
There are several reasons why you might want to structure your business as a LLP:
- Limited Liability: Like a corporation, LLPs shields the personal assets of its limited partners from the debts and legal liability of the company.
- Pass-Through Tax Entity: LLPs are taxed as a pass-through entity and avoid the double tax associated with corporations. This means that the LLP itself is not taxed. Instead, partners are taxed according to their individual tax bracket when they receive a share of the LLPs profits.
- Survivability: Unlike a general partnership, LLPs do not have to be reformed every time a partner dies.
- Late Filing: An existing general partnership can convert to a limited partnership at any time if it fulfills the requirements listed above.
- General Partner Liability: Unlike a limited partnership, LLPs do not require there to be a general partner that is liable for the actions and debts of the partnership.
While the limited liability an ability to avoid the double tax associated with corporation can be appealing, there are a few disadvantages to structuring your business as a LLP:
- Filing and Fees: Unlike a general partnership or sole proprietorship; LLPs require filing formation forms and payment of some administrative fees which can cost upwards of $200 and may require hiring lawyer.
If you are looking for an attorney to help you with structuring your business, then contact a local Mississippi business lawyer today to get the help you need.