A limited liability partnership (LLP) is a popular choice of structure for a business because it allows all of the owners to enjoy limited liability while they do not give up any right to run their business. The manner of forming an LLP varies somewhat from state to state.
In order to register an LLP in Pennsylvania, a general or limited partnership needs to register as an LLP with the Pennsylvania Department of State’s Bureau of Corporations and Charitable Organizations. An LLP in Pennsylvania is an existing general partnership that files a statement of registration with the Bureau of Corporations and Charitable Organizations, electing or claiming limited liability status.
Another option among the business structure options in Pennsylvania is the limited liability limited partnership (LLLP). This status also provides its partners with limitations on their personal liability as partners. Professional partnerships, such as law firms or accounting firms, often opt for the LLP or LLLP status.
The LLP and LLLP should not be confused with a limited liability corporation or LLC in Pennsylvania. An LLC has features of both a partnership and a corporation. The owners of an LLC are referred to as “members.” A member may be an individual, a corporation, or even another LLC. An LLC provides the liability protection of a corporation for owners, with the advantage of being treated as a partnership for the purpose of taxation.
An LLC may have any lawful purpose other than acting as an insurer. It can be a for-profit or non-profit operation, but if it is a non-profit, it must state its purpose in the certificate of organization.
As noted above, an existing Pennsylvania general or limited partnership may adopt the status of an LLP on its Statement of Registration. The limited partnership must be an existing limited partnership registered with the Pennsylvania Department of State in order to use this form. The forms and instructions on how to use them are available on the website of the Bureau of Corporations and Charitable Organizations.
In addition to forms, the partners who are forming an LLP may want to have a partnership agreement. This is a contract among the partners that describes the relationship that each partner has with the business. In addition, it outlines the rights, obligations, and authority that each individual partner has with respect to the partnership. It may also address the following issues:
- The percentage of the partnership owned by each partner;
- In the case of a limited liability partnership, the partnership agreement may specify exactly what type of liability each partner has for the various operations of the partnership and how it is limited;
- Which partners have the authority to manage the partnership and make business decisions on behalf of the partnership;
- The method the partners will use to resolve business disputes among the partners, e.g., alternative dispute resolution or negotiations;
- Under what circumstances the partnership would be dissolved or transferred, and how;
- The process for adding new partners;
- The process for the departure of a partner;
- Any other policies or procedures that the partners want to adopt for making important decisions or managing important aspects of the partnership.
The Internet is rife with canned partnership agreements. It is better to have a Pennsylvania corporate lawyer draft a partnership agreement that fits and reflects the unique circumstances of a particular business.
What Are the Requirements for an LLP?
The state requires an LLP to have a name that contains one of the following:
- Limited liability partnership;
- An abbreviation of one of these words at the end of the name.
An LLP must also establish an office in Pennsylvania where official documents that are intended for the LLP are received. If the LLP is a foreign LLP, which means that it is an LLP established in another state or country, the office that it has in Pennsylvania must be a registered office.
Additionally, an LLP must file paperwork to be officially registered as such. This mandatory paperwork is filed with the Bureau of Corporations and Charitable Organizations. It can be submitted for filing either by mail or online. A domestic or non-foreign LLP must file a Statement of Registration Domestic Limited Liability Partnership.
This can be completed by:
- Providing the LLP’s name and office address;
- Indicating that the company is an LLP;
- Indicating when the registration should become effective; and
- Including a signature from one of the LLP’s partners.
All foreign companies, including foreign LLPs, must complete and file a Foreign Registration Statement, which involves the following:
- An indication that the form is for an LLP;
- The LLP’s original name;
- A second choice of name for the LLP if the original name does not meet the requirements;
- The identity of the jurisdiction in which the LLP was formed;
- The address of the LLP’s principal office; and
- The address for the LLP’s registered office.
What Paperwork Do I Need to Form an LLP?
As noted above, a general or limited partnership may register as an LLP with the Pennsylvania Department of State’s Bureau of Corporations and Charitable Organizations in order to operate as an LLP. An LLP in Pennsylvania is an existing general partnership that has filed a statement of registration with the Bureau of Corporations and Charitable Organizations, electing or claiming limited liability status.
Each partner involved in the structure of an LLP must sign on to the operational agreement, which dictates how much each must contribute to the operation of the business.
In addition to the state-mandated forms that must be filed with state agencies, the partners who are forming an LLP may want to have a limited liability partnership agreement, as explained above.
What Benefits Does Pennsylvania Give to an LLP?
The main benefit of an LLP is limited liability, of course. In a general partnership, all partners who are members of the partnership share the same risks to their personal finances. That includes any actions of misconduct by any of the partners or contracts signed without the consent from the rest of the group.
With the LLP structure, each partner is personally responsible for their own conduct only. Any issues with misconduct that place their equity stake or personal resources at risk cannot apply to any other member of the operating agreement. So, in an LLC of doctors, one doctor can only be liable for their own malpractice, not the other partners’ malpractice.
Pennsylvania provides Pennsylvania LLPs with the Community-Based Service Credit, which is a tax credit for businesses that make contributions to nonprofits that are focused on disability or mental illness. Additionally, the filing fee for a company is waived if a military reservist or a military veteran owns the company.
What Disadvantages Does Pennsylvania Give to an LLP?
Pennsylvania requires that all LLPs file a Certificate of Annual Registration, which is due by April 15th of each year. The filing fee is $350 times the number of partners in the LLP, which is considered to be somewhat high.
Do I Need An Attorney to Form an LLP In Pennsylvania?
If you are interested in forming an LLP in Pennsylvania, you want to consult a Pennsylvania corporate lawyer for help. legalMatch.com can connect you to an experienced local lawyer. Your lawyer can guide you through the process of choosing a structure for your business and help you avoid any issues. They can also represent you in court, as needed.
In addition to taking care of the required paperwork and forms, your attorney can draft a personalized partnership agreement. This agreement will clearly lay out the liability and limitations on the liability of the partners, as well as how other issues involved in operating your partnership are to be managed.