A limited liability limited partnership (“LLLP”) is a type of business entity that a person can select as an option when setting-up their new company. More specifically, an LLLP is considered to be a form of a limited partnership (“LP”). It provides its general partners with the same kind of liability protection as those offered in a limited liability partnership (“LLP”).
For example, a person starting a business may choose to structure it as an LLLP, a corporation, a general partnership, a limited liability company (“LLC”), and so on. One of the main reasons for selecting a particular type of organization is for tax purposes.
Other reasons may depend on the kinds of benefits that a person can receive, the advantages that the partners may have, and the primary purpose of the business.
LLLP organizations are one of the newest structures available for people starting a business. They require one or more general partners and are mostly made up of limited partners. Similar to an LP, a general partner is responsible for managing the LLLP, whereas a limited partner is usually only involved in an investor capacity.
Like all the other business entities, LLLPs also have different requirements depending on the state. This generally includes what is necessary to form the company, the kinds of documents to file with the state, and having to pay various filing fees.
One important thing to keep in mind about LLLPs is that they are not available in every state. Therefore, before you elect LLLP as the type of business entity for your organization, you should speak with both a tax advisor and a business attorney. A business attorney will be able to provide advice about whether an LLLP is right for you and if it is available as a business option in your state.
Who Forms Limited Liability Limited Partnerships?
LLLPs are not the most common type of business entity. As previously mentioned, the reason for this is because it is a new form of entity that is not yet recognized in every state. In general, LLLPs are usually created by businesses associated with the real estate industry.
For example, investors may choose to form an LLLP when constructing a hotel chain or a number of commercial buildings. An LLLP gives them certain advantages and protections that are not provided by the other entities, such as being let off the hook for personal liability.
In other words, they may lose their investment money, but they cannot be held personally liable for debts owed or unpaid taxes that belong to the LLLP. Unlike some of the other entities, this benefit can be exercised by both the limited partners to the LLLP and the general partners.
Some other examples include publishing firms, car dealerships, asset management companies, and as an outlier in the media industry, even CNN.
What are Some Differences Between a Limited Partnership (LP) and a Limited Liability Limited Partnership (LLLP)?
As discussed above, LPs and LLLPs are similar in that they both have to have at least one general partner and some number of limited partners. In each of these types of entities, the limited partners are only liable for their investments and they are not liable for any of the debts or obligations of the partnership itself.
In contrast, under an LP formation, the general partner will be equally responsible for debts incurred by the partnership as well as can be held personally liable.
On the other hand, under an LLLP formation, the general partner can no longer be held personally responsible for debts incurred by the partnership. They have a figurative shield of “limited liability.” This also means that they will not be liable for the negligence or misconduct of the other general partners.
What are Some Differences Between a Limited Liability Partnership (LLP) and a Limited Liability Limited Partnership (LLLP)?
An LLP differs from an LLLP in that the LLP does not have any limited partners. A good way to remember the difference between an LLP and an LLLP is that an LLP is a type of general partnership with limited liability protection.
In contrast, an LLLP is a limited partnership where both sets of partners receive limited liability protection.
How is a Limited Liability Limited Partnership Created?
Again, since LLLPs are the newest type of business entity, it has not been adopted yet by every state. In the states that have adopted LLLPs, it can usually be formed by adhering to a state’s requirements, which are typically set out in one of the following two statutes:
- A state statute that directly authorizes the creation of an LLLP; and
- In accordance with the state statute, an LP can file for limited liability protection for its general partners, which will transform it into an LLLP.
Do I Need to Hire an Attorney for Help with Creating My LLLP?
Determining what type of business entity that your organization should be structured as plays an essential role in the success of your business. Therefore, you should strongly consider contacting a local business attorney who can help you to evaluate the options.
Additionally, an experienced business attorney can also review the necessary paperwork before filing it with your state and can walk you through the filing process as well.