A limited liability partnership is a popular type of business structure because it allows the partners, or the owners of the business, to be equally in charge of running the business while not being personally liable for the actions of the LLP. Instead, all of the partners of the LLP are entitled to limited liability even though they are actively involved in the business.
Limited liability partnerships differ from limited partnerships, which have at least one general partner and one limited partner. The limited partner does not have managerial responsibilities.
In some instances, limited partners are called silent partners because they do not participate in day-to-day operations of the LP. In a limited liability partnership, on the other hand, all of the partners can participate equally.
The partners in a limited liability partnership will not be liable for any amount other than their investment in the business. Many individuals create LLPs when they want to start a business while protecting their personal property in case they are sued.
If the limited liability partnership is sued, none of the single partners will be solely personally liable. An LLP is similar to a general partnership because all of the partners are permitted to actively participate in the LLP’s management.
In addition, in general partnerships, the partners evenly split profits as well as have equal liability. A general partner is personally liable for the debts of the partnership.
One major distinction between general partnerships and limited liability partnerships is that general partnerships are not formal business structures, meaning that no paperwork is required to form one. A general partnership is formed when partners transact business together.
Limited liability partnerships, on the other hand, have formal formation processes in Tennessee which must be followed. LLPs are also required to pay formation fees in Tennessee.
What is the Difference Between a Limited Liability Company and a Limited Liability Partnership?
A limited liability company (LLC) and a limited liability partnership are basically the same kind of business structure. The main difference between an LLC and an LLP is that an LLC has the same legal liability shield as corporations.
Because of this, the members of an LLC may not be held personally liable for the debts and obligations of the LLC.
Who is Liable for Acts of Negligence in an LLP?
It is important to note that even though the partners in a limited liability partnership are not liable for the negligent actions or misconduct of the other partners, they are held personally liable for their own negligent conduct.
A partner is only shielded from liability when the wrongful actions were committed by the other partners or the partnership, which is considered a separate legal entity from the partners.
Can an LLP Sue its Individual Partners?
Yes, a limited liability partnership can sue, in its own capacity, an individual partner. This includes a lawsuit for a breach of the partnership agreement or for causing harm to the partnership.
An individual partner is also permitted to sue a partnership so they can enforce:
- The partnership agreement;
- Their right to relevant information about the partnership; or
- Their rights to an equal share of the profits which are generated by the partnership.
What Are the Requirements for an LLP in Tennessee?
If a limited liability partnership wants to transact business as an LLP in Tennessee, it must satisfy certain requirements which are provided in the Tennessee Revised Uniform Partnership Act of 2001. In Tennessee, then name of the limited liability partnership is required to contain:
- L.L.P.; or
- Registered Limited Liability Partnership.
In addition, the LLC must choose a company registered to do business in Tennessee or an individual who is living in the State of Tennessee to serve as its registered agent. This company or individual will be tasked with receiving any legal documents which are intended for the LLP on its behalf.
In addition, an LLP is required to register with the Tennessee Secretary of State Division of Business Services by filing the required paperwork.
What Paperwork Do I Need to Form an LLP in Tennessee?
The paperwork that partners will need to form an LLP in Tennessee can be found on the website of the Tennessee Secretary of State. This paper work can be filed:
- Via mail; or
- In person.
A domestic LLP, which is an LLP that has not registered elsewhere, is required to file an Application for REgistration Limited Liability Partnership – Domestic. This form can only be completed if the business can provide:
- The name of the LLP;
- The street address of the primary office of the LLP;
- The mailing address for the LLP if it is different that the street address;
- The number of partners in the LLP;
- The registered agent’s name and address; and
- A description of the work in which the LLP is involved.
Prior to filing the form, at least one partner is required to sign it. If an LLP has already registered in another jurisdiction, called a foreign LLP, it is required to file a Notice of Registration of Foreign Limited Liability Partnership.
In order to complete this form, the LLP is required to provide the same information as the Application for Registration Limited Liability Partnership – Domestic. One difference, however, is that the individual completing the form must provide where the LLP was originally created as well as the original name of the LLP if that name differs from the one that will be used in Tennessee.
The form also requires the signature from one individual who is associated with the LLP. The foreign LLP is also required to submit a Certificate of Existence in addition to the previously discussed form.
What Benefits Does Tennessee Give to an LLP?
Tennessee provides several benefits to LLPs in the state. One such benefit is the program FastTrack, which helps new companies grow or relocate to the State of Tennessee. A qualified company can also obtain assistance with growing, including procuring temporary office space as well as assistance with relocating equipment and financial aid.
What Disadvantages Does Tennessee Give to an LLP?
As with any state, there are disadvantages to creating an LLP in Tennessee. All LLPs are required to file an annual report with the Division of Business Services of the Tennessee Secretary of State.
If the LLP does not file the report within 2 months of its due date, the LLP may be administratively dissolved. The filing fee which the LLP is required to pay to file this report is fairly.
The fee is calculated at $50 per partner. There is a minimum payment of $250 and the maximum the LLP will be required to pay is $2,500.
Should I Hire a Lawyer?
It is essential to have the assistance of a Tennessee corporate lawyer for any issues, questions, or concerns you may have related to forming an LLP in Tennessee. When you are starting an LLP in Tennessee, it is important to be cautious, as any single error during the process may prevent your company from becoming an LLP.
Because of this, having the assistance of a lawyer is essential. Your lawyer can advise you of applicable laws in Tennessee, assist you with completing or filing any paperwork, and assist in drafting a partnership agreement.