A business owner has numerous options when they are determining how to legally structure their company, including:
- Limited liability partnerships (LLPs); and
- Limited liability companies (LLCs).
LLPs are a popular choice of business structures because of the benefits of permitting all of the owners, called partnership, having leadership roles in the company while still protecting their assets.
A limited liability partnership (LLP) is a type of business structure which permits the individual partners to be protected from the debts and liabilities of the other partners as well as from certain liabilities and debts of the partnership. If legal action is brought against the partnership as a whole, then no single partner will be personally liable.
LLPs differ from general partnerships because, in general partnerships, all partners can be held liable for the debts and obligations of the partnership. Limited liability partnerships are similar to general partnerships because all partners are able to actively participate in the management of the business.
In addition, all gains and losses from the business are passed through to the partners based on the partnership agreement. In some states, including California, New York, Oregon, and Nevada, only individuals who are licensed in certain professions are permitted to form LLPs, including:
- Public accountants;
- Lawyers; and
Although the partners in an LLP are not liable for their other partners’ acts of negligence or misconduct, the partners are personally liable for their own negligent acts. A partner is only shielded from liability when the wrongful action was committed by the partnership itself or by other partners. This is because the partnership itself exists as a separate legal entity from the members.
An LLP may sue individual partners in its own capacity. This may include an action for breach of the partnership agreement or for causing harm to the partnership.
Individual partners may also sue the partnership for certain reasons, including to:
- Enforce the partnership agreement;
- Enforce their right to relevant information regarding the partnership; and
- Obtain their rights to an equal share of profits which are generated by the business.
There are no special rules regarding lawsuits between partners, such as when one partner sues another for conduct which does not involve the partnership. If, however, the partner acted with the authority of the partnership against another partner personally, the injured partner can likely sue the partnership itself.
If a company in South Carolina wants to structure their business as an LLP, it will be required to register as an LLP with the South Carolina Secretary of State.
What are the Requirements for an LLP?
In South Carolina, the Uniform partnership Act provides requirements which must be met by a business wanting to register as an LLP in the state. One requirement is placing either the term “Registered Limited Liability Partnership” or the term “L.L.P.” at the end of the business name.
The business is also required to establish a registered office as well as appoint a registered agent who consents to receive service of process for legal documents on behalf of the LLP. The registered agent is required to be either a South Carolina resident or a corporation that is registered to do business in South Carolina which is located at the registered office.
Every South Carolina LLP is required to file specific paperwork with the Office of the South Carolina Secretary of State. All LLPs are also required to obtain either $100,000 of liability insurance or to set aside enough funding to cover the liability of the LLP.
What Paperwork Do I Need to Form an LLP?
As previously noted, an LLP is required to register with the South Carolina Secretary of State by filing the appropriate paperwork, which must be sent in duplicate to the Office of the South Carolina Secretary of State in the mail. An LLP which is formed as an LLP only under the laws of South Carolina, which is called a domestic LLP, is required to complete an Application for Registration of a Limited Liability Partnership.
In order to complete this application, the individual is required to provide:
- The name of the LLP;
- A statement which describes the LLPs line of work;
- The address of the LLP’s registered office;
- The name of the registered agent;
- The number of partners that are in the LLP; and
- The address of the principal office of the LLP if the principal office is located outside of the state.
The individual must also indicate that the application is the original application of the LLP and not a renewal. In addition, the application will need to be signed by both the registered agent as well as the partner who is either in possession of a majority interest in the business or the individual who is authorized by the partners who possess a majority interest in the business.
If an LLP was formed under the laws of another jurisdiction, it is known as a foreign LLP. This type of LLP will be required to complete an Application for a Certificate of Authority to Transact Business in South Carolina by a Limited Liability Partnership and send the application with a Certificate of Existence.
The individual filling out the application must indicate on that application that it is the original application of the LLP and not a renewal. In addition, the application requires that the following information be disclosed:
- The name of the LLP;
- The original location and date of the creation of the LLP;
- The address of the registered office of the LLP; and
- The name of the registered agent of the LLP.
The application is also required to contain the signatures of the registered agent as well as the partner or partners with a majority interest in the company or a partner who has been authorized to sign it.
What Benefits Does South Carolina Give to an LLP?
In South Carolina, there are a number of incentives and grants which are given to businesses in the state. For example, if a company revitalizes a retail space, it may be able to receive tax credits for real property taxes as well as credit for license taxes or for income taxes.
What Disadvantages Does South Carolina Give to an LLP?
There are some disadvantages for LLPs in South Carolina. This includes the requirement that every LLP must file the same registration form each year in order to renew its registration. The South Carolina Department of Revenue charges a 5% penalty for each month that a renewal is late. If a business does not renew its LLP status, it risks being dissolved.
Should I Hire a Business Lawyer For Help with a South Carolina LLP?
Yes, it is essential to have the assistance of a South Carolina corporate lawyer for any questions or concerns you have with your LLP. Having the assistance of an attorney is a great investment in your LLP.
Your attorney can advise you regarding South Carolina regulations for LLPs as well as how to take advantage of what South Carolina may offer for your LLP. Your attorney can also guide you through the process of forming your LLP and assist you with any applications or other paperwork you are required to submit.