A limited liability partnership (LLP) is a type of business arrangement that allows the individual partners to be free from the debts and liabilities of all of the other partners, as well as from certain debts and liabilities of the partnership. In an action brought against the partnership as a whole, no single partner is personally liable. In this way, it differs from a general partnership, in which all partners are liable for the partnership’s debts and obligations.
In New York, only licensed professionals can form a LLP. The licensed professions that can form a LLP are doctors, lawyers, dentists, therapists, and design professionals such as engineers.
In New York, the requirements to form a New York LLP are the following:
- File a Certification of Registration: To form a New York Limited Liability Partnership, you must file a Certification of Registration with the New York Division Corporation and pay a filing fee.
- Name of Your Limited Partnership: You must also name the LLP and be sure to check that the name of the LLP is not used and unique from other business entities of trademarks on New York. The name of an New York LLP has to include the words “registered limited liability partnership,” “limited liability partnership,” the abbreviation “L.L.P.” or the designation “RLLP” or “LLP,” in uppercase or lowercase letters.
- Statutory Agent: Every New York LLP must have a statutory agent that will represent the LLP in any matter or will take legal papers on the behalf of the LLP.
- Get EIN: Since a LLP is a separate entity than its partners; you would need to get a federal Employer Identification Number from IRS.
- Publication Requirement: Within 120 days that the Corporate Divisions approves the Certification of Registration for the LLP, a copy of the Certification of Registration must be published in the county of the LLP’s principal place of business.
- Partnership Agreement: In New York, a partnership agreement is not required when forming a LLP, but it is recommended. A partnership agreement would state what each partner can and cannot do when making business decisions.
- Register with Department of Revenue & Get Business Licenses: Depending on the type of business that you have, you would need to register with department of revenue DOR if you are selling goods and collecting tax and obtain a business license.
- Pay Annual Filing Fee: In New York, you are required to pay an annual filing fee. The fee can range from $25-$4,500 depending on the amount of income generated by the partnership.
- File Five Year Statements: In New York, you must file Statements outlining your LLP every five years (within 60 days prior to the five-year anniversary)
To form a New York Limited Liability Partnership, you must file a Certification of Registration with the New York Division Corporation with the Corporate Division with the following information:
- Official Name of the LLP
- Address of office of LLP
- Address of the agents of LLP
- Name and Address of each partner of the LLP
There are several benefits of having a limited liability partnership in New York. These benefits are:
- Limited Liability: Limited partners are all protected in a LLP and every partner gets management control of the business.
- Tax Benefits: The profits and losses in a LLP flow through the business to the partners, all who are taxed on their personal income tax returns and get to share the profits and losses and are not held to double taxation.
- Flexibility: Limited liability partnerships offers business owners and partners flexibility in business ownership. Partners have the right and control to decide how they will individually contribute to business operation and management. They can also divide the business duties based on experience of each partner.
While New York offers a lot of advantages to LLPs, they also have some disadvantages, such as:
- Death of a Partner: LLPs are automatically dissolved upon a death of a partner even if the other partners want it to continue.
- Partners Do Not Have to Agree: In an LLP, the partners do not need to consult with one another over certain business decisions. This is why a partnership agreement is recommended before the LLP is formed to state what each partner can and cannot do.
- No IPO: LLPs cannot get money from the public and they cannot go for an IPO.
The selection of the right business entity is vital to the success and organization of an organization. Hiring local New York business lawyer familiar with LLPs will help you to analyze the pros and cons of choosing a particular business entity. If you decide an LLP is right for you, a lawyer can help you draft your state’s required filing documents