A limited liability partnership (“LLP”) is a type of business entity that is selected by partners to a business venture. The LLP business entity provides partners with liability protections from the negligent or reckless conduct of other partners. Wisconsin has enacted the Wisconsin Uniform Partnership Act to regulate the formation and ongoing operation requirements of LLPs.
The basic requirements of all LLPs are (1) there are two or more partners seeking to conduct business and (2) the proper paperwork has been filed with state. However, each LLP will want to have a well drafted and tailored operating agreement. An operating agreement will lay out the rights and responsibilities of each partner to the LLP. For example, the LLP operating agreement can discuss which partner to responsible for the LLP’s bookkeeping and where the books and records of the LLP are to be located.
Paperwork that is filed with Wisconsin can include notices related to organization, modifications, changes in partnership structure, and many other material matters impacting the LLP and its relationship with Wisconsin. All filed paperwork must meet the following requirements:
- the filing must be physically or electronically delivered in written form as permitted by applicable instructions;
- the filing must be in English (name of LLP need not be in English) and numbers must be in Arabic or Roman numerals;
- the filing must be signed by an authorized person; and
- the filing must contain the name of the drafter of the filing (if required).
The major advantage of selecting the LLP model is that partners to the LLP are shielded from the negligent or reckless misconduct of other partners. Therefore, the LLP model is popular among professional organizations such as accounting and law firms. If, for example, a partner to an accounting firm was stealing client assets the other partners to the LLP would not be personally liable for the theft – assuming they had no knowledge.
Generally, the biggest disadvantages associated with the LLP model are related to the internal operation and obligations of partners towards each other. Well run LLPs are generally governed by comprehensive operating agreements. These agreements lay out many of the rights and responsibilities partners have towards each other and to the LLP.
This may result in something unplanned, like a partner’s death, and if the LLP does not have a provision and the state doesn’t have a law controlling it, then the LLP could dissolve.
If you are trying to form a LLP in Wisconsin, then contact a local Wisconsin business lawyer today if you have any concerns about LLP partner liability and obligations.