A partnership is one of the most common types of business entities. A limited liability partnership (LLP) is a type of business structure that allows the partners to be free from the debts and liabilities of all of the other partners and from certain debts and liabilities of the partnership.

Unlike general partnerships, the partners in a limited liability partnership are not personally liable for certain financial obligations of the business. Professional service firms often form LLPs, which includes law and accounting firms.

If an action is brought against the partnership as a whole, no one partner is personally liable. This is in contrast to a general partnership in which all partners are jointly and severally liable for the partnership’s obligations and debts.

An LLP is similar to a general partnership because all of the partners may actively participate in the management of the business. In addition, the losses and gains from the business are passed through to the partners according to their partnership agreement.

The procedures for forming a limited liability partnership vary from state to state. In certain states, only individuals who are licensed to practice law, public accounting, or architecture are permitted to structure their business as an LLC. These states include:

  • California;
  • New York;
  • Oregon; and
  • Nevada.

However, in Washington State, any business may register as an LLP. In Washington State, the creation and management of limited liability partnerships are governed by the Revised Uniform Partnership Act. The Washington Secretary of State is responsible for the registration of LLPs.

What are the Requirements for a Limited Liability Partnership in Washington?

As noted above, unlike the majority of states, any business may become a limited liability partnership in Washington. However, the business is required to have at least two partners. In other words, a sole proprietor cannot form an LLP.

In Washington, if a partnership operates under an assumed name, or something other than the surnames of the partners, they must register the name of the business with the state. In addition, the partnership must designate their LLP status by placing “LLP” after the business name.

The partnership must also designate a registered agent. A registered agent is an individual who is authorized to accept important documents on behalf of the LLP, such as paperwork initiating a lawsuit. If an LLP needs assistance selecting a registered agent, a business lawyer can help with the process.

What Paperwork Do I Need to Form a Limited Liability Partnership?

In order to establish a limited liability partnership, the business must file a Limited Liability Partnership Registration with the Washington Secretary of State. This form may be submitted in person or by mail.

The LLP must provide the following information on their Statement of Qualification:

  • The name of the LLP;
  • The principal business address;
  • The effective filing date;
  • The number of current partners;
  • The LLP’s business type or purpose;
  • The registered agent’s name, address, and signature, and
  • The names, addresses, signatures of the partners.

The LLP may be required to file additional paperwork if it plans on operating under an assumed name. In addition to the required paperwork, an LLP should consider having a partnership agreement.

What is a Partnership Agreement?

A partnership agreement provides the terms, conditions, rights, and responsibilities of all of the partners involved in the business. It outlines the duties and responsibilities of each type of partner. The agreement also defines the partnership’s scope of activity.

A partnership agreement is a contract that provides legal enforcement for the terms of the business operations to which the partners agreed. It is very important to have a partnership agreement in writing.

A partnership agreement may be used to resolve any future issues in the business. It includes information such as:

  • Contributions of the partners;
  • Distribution of business profits;
  • Information regarding each partner, including:
    • their name; and
    • contact information;
  • The duties and responsibilities of all partners;
  • The allocation of profits and losses for the partners, which are typically equal;
  • The scope of the functions and activities of the partnership;
  • The goals and missions of the partnership;
  • Restrictions on management and leadership;
  • Information regarding dispute resolution for the partnership; and
  • Information governing the termination of the partnership.

If a dispute arises between the partners or a lawsuit is filed, the court may examine the partnership agreement. The court may use this agreement to determine what the proper decision regarding an issue should be based upon the information agreed to by the partners in the partnership agreement.

Can an LLP Sue its Individual Partners?

Yes, a limited liability partnership may sue, in its own capacity, an individual partner. An LLP exists as a separate legal entity from the individual partners.

This may be required when a partner breaches the partnership agreement or causes harm to the partnership. In addition, an individual partner may also sue the partnership in order to enforce the partnership agreement or to enforce their right to relevant information regarding the partnership, or for their right to an equal share of the profits which were generated by the partnership.

Can One Partner in an LLP Sue Another Partner?

Yes, partners within a partnership may sue each other. There are no rules regarding when a partner sues another partner for conduct that did not involve the partnership. For example, if a partner hits another partner with their vehicle. However, if one partner acted within the authority of the partnership against another partner personally, the aggrieved partner would likely sue the partnership.

What Benefits Does Washington Give to a Limited Liability Partnership?

In Washington State, limited liability partnerships receive specific benefits. An LLP is not required to pay income taxes. Instead, the business income passes through to the partners who are required to report the income to the Internal Revenue Service (IRS) and pay taxes individually.

In addition, one partner may not be personally liable for the debts of the LLP or the negligence or misconduct of another partner. In other words, a partner’s personal assets cannot be used to satisfy the debts of the partnership unless the partner was negligent, engaged in misconduct, or personally agreed to the repayment.

What Disadvantages Does Washington Give to a Limited Liability Partnership?

There are some disadvantages to a limited liability partnership in Washington State. The stat does not protect the partners in an LLP from all business liabilities. As noted above, a partner may be personally liable if they engage in misconduct, are negligent, or personally agree to pay a debt. When forming an LLP, the partners should consider purchasing liability insurance to help offset any risk of liability.

If the partners are concerned about liability, they may consider creating a limited liability company (LLC) instead. LLCs offer the business owners additional protection. There are, however, different rules and procedures for forming LLCs in Washington State. A business lawyer can provide advice regarding which structure is best for the partners’ needs.

Should I Hire a Business Lawyer?

It is essential to have the help of an experienced Washington corporate lawyer. While it may seem like completing a form to start a limited liability partnership is a simple and easy process, there are more requirements for structuring an LLP.

For example, you should consider drafting a partnership agreement, evaluate liability insurance policies, and there may also be ongoing reporting and legal obligations. Your lawyer can ensure you follow the correct procedures and meet the requirements for an LLP in Washington State. Having a lawyer help with your business can protect your financial future.