A limited liability partnership (LLP) is one of many structures that people can choose for their business. The key benefit of an LLP is that the limited partners can be involved in funding the partnership without placing their personal assets at risk for its debts and other liabilities. There are at least two partners in an LLP, and at least one of them must be a general partner and one a limited partner.
Again, a Rhode Island LLP must have at least one general partner, who is responsible for managing the operations of the business. The general partner can be a person or an entity such as a corporation. The general partner makes the important decisions for the partnership and can be held personally liable for any of its debts or other obligations.
An LLP also has at least one limited partner. Again, these limited partners are more like investors and do not participate in the management of the business. A limited partner also has limited liability for the debts and obligations of the partnership.
In Rhode Island, an LLP is usually a group of professionals who are engaged in the practice of public accountancy, law, architecture, or services related to accountancy or law. Rhode Island law requires an LLP to maintain certain levels of insurance.
What Are the Requirements for an LLP?
There are a number of requirements that a Rhode Island business must satisfy if it wants to be an LLP. Perhaps the most important requirement is submitting a Registration of Limited Liability Partnership with the Rhode Island Department of State. Additionally, a partnership must adopt a name that ends with “L.L.P.”, “LLP”, or “limited liability partnership.” An LLP must also either establish its principal office in Rhode Island or appoint a registered agent who is willing and able to receive official documents on behalf of the partnership.
If the LLP intends to offer a professional service, then it will need to obtain a license to practice that profession from the appropriate licensing agency. It would also have to have sufficient liability insurance. Finally, an LLP must determine a location where it will keep copies of all of its business records.
If the partnership is engaged in the practice of the following professions, it must do the following:
- Engineering: It must provide evidence of a current application with the Rhode Island Department of Business Regulation (DBR), Board of Design Professionals;
- Law: It must apply for a limited liability entity license from the Rhode Island Supreme Court within thirty (30) days of filing with the Rhode Island Department of State;
- Medicine: It must apply for licensing from the Rhode Island Department of Health, Professional Regulation;
- Land Surveying, Architecture or Landscape Architecture: It must apply for licensing from the Rhode Island Board of Design Professionals (DBR);
- Accountancy: It must apply for licensing from the Rhode Island DBR, Board of Accountancy.
Contact information for all of the agencies noted can be found on the Registration of LImited Liability Partnership form.
What Paperwork Do I Need to Form a Rhode Island LLP?
The necessary paperwork can be either filled out online or printed out, completed and sent in via the U.S. Postal Service or other delivery service. If a partnership is interested in registering a domestic LLP, which is an LLP that has not been registered in any other state, the document required is the Registration of Limited Liability Partnership.
The form requires the name of the LLP, the street address of the LLP’s principal office, and the names and addresses of all of the partners who live in Rhode Island. Also required is the name and address of a registered agent if the LLP’s primary office is not in Rhode Island, a street address for the location where the LLP’s business records will be maintained, a statement about the type of business in which the LLP is involved, and the contact information for whomever is submitting the document. At least one of the partners needs to sign the form.
If the LLP has already been registered in another state, then it is a foreign LLP and it will need to fill out a Notice of Registration. The form has all of the same information requirements as the Registration of Limited Liability Partnership, as well as a few additional items. In order to complete this form, the partnership also needs to include an additional name for the LLP, if the original name cannot be used in Rhode Island and the original jurisdiction where the company was first registered.
The registration shall be effective for 1 year after the date of filing unless voluntarily withdrawn. A renewal application must be filed during the 60 day period preceding the expiration date of the application. If a renewal application is not filed during the 60 day period, the status of the LLP expires. A registered LLP is responsible for filing a renewal application. The Department of State does not send a notice of expiration to a partnership when its renewal application is due. The limited partner has a passive income as they are not engaged in running the partnership.
Rhode Island does not require an LLP to have a partnership agreement, but it is always a good idea for a partnership to have one. It should address such issues as:
- How long the partnership should last: Of course, this can be changed as circumstances require;
- The roles of each of the partners, both general and limited;
- How much Initial capital is being invested and what ongoing capital contributions will be made:
- Profit and loss distribution among the partners:
- Meeting and voting rights;
- Who the general managing partner is and exactly what their duties and authority is;
- Accounting expectations
- Under what circumstances a partner can exit and when and how the partnership can be dissolved.
It is better not to leave the operation and conditions of a partnership to chance, but to have a sound plan for all eventualities that can befall both the partners and the partnership.
What Advantages Are There to a Rhode Island LLP?
In a Rhode Island LLP, at least one of the partners must have unlimited liability; this would be the general partner. Limited partners have limited liability and are protected to the extent of their investment from debts and liabilities of the partnership.
A Rhode Island LLP is taxed on a pass-through basis. So, an LLPs income is passed through to the partners and they pay income tax on their respective shares of the income. If a limited partner has a loss, it is treated differently than the loss experienced by a general partner. The general partner can take a loss even if the individual has no additional income to offset it.
What Disadvantages Are There to a Rhode Island LLP?
In Rhode Island, an LLP’s registration is not indefinite. Domestic LLPs must file a renewal application every year within the 60 days preceding the LLP’s anniversary. Foreign LLPs must file a new notice every two years on its biennial anniversary.
Should I Hire a Lawyer?
An experienced business lawyer can help you choose the form of business entity that best serves your purposes. If that is a limited liability partnership, your lawyer can help you with registration and the other requirements, e.g. professional licensing. Your lawyer can also help ensure that you renew your registration annually.
A Rhode Island corporate lawyer can also help a partnership by drafting a partnership agreement that tailors your partnership’s operations to fit your style of doing business.