A limited liability limited partnership (LLLP) is a newer business entity option that provides general partners with liability protection similar to that offered in a limited liability partnership (LLP).
An LLLP requires one or more general partners and is mostly made up of limited partners. General partners manage the LLLP, while limited partners are typically only involved as investors. As with all business entities, LLLPs have different requirements depending on the state, including what is necessary to form the company, the types of documents to file with the state, and filing fees.
LLLPs are not available in every state, so consulting with a business attorney and tax advisor is crucial when deciding if this is the right entity for your business. A business attorney can advise you on whether an LLLP is the best choice for your organization and if it is available in your state.
Who Forms Limited Liability Limited Partnerships?
LLLPs are a relatively new form of business entity and are not widely used due to their limited availability in some states. They are most commonly used by businesses associated with the real estate industry, such as investors constructing commercial buildings or hotels.
One advantage of an LLLP is that it provides liability protection for both limited and general partners. In the event of unpaid debts or taxes, partners are not held personally liable, protecting their personal assets. This benefit is unavailable in other entities, such as general partnerships or sole proprietorships.
Other businesses that may form an LLLP include publishing firms, car dealerships, and asset management companies. Even a media giant, CNN, has chosen to operate as an LLLP.
While an LLLP can provide unique advantages and protections, it’s important to carefully consider all options and seek legal advice before deciding. LegalMatch can connect you with experienced business attorneys who can guide you on the best entity structure for your business and help ensure that you comply with all legal requirements.
What are Some Differences Between a Limited Partnership (LP) and a Limited Liability Limited Partnership (LLLP)?
LPs and LLLPs are similar in that both require at least one general partner and some number of limited partners, and both provide liability protection for limited partners. However, there are some key differences between the two.
In an LP formation, the general partner is equally responsible for the debts and obligations of the partnership and can be held personally liable for these debts. In contrast, under an LLLP formation, the general partner is shielded from personal liability for debts incurred by the partnership. This limited liability protection also extends to the general partner’s protection against the negligence or misconduct of other general partners.
What are Some Differences Between a Corporation and a Limited Liability Limited Partnership?
One key difference between a corporation and an LLLP is how they are owned and managed. A corporation is owned by shareholders, who elect a board of directors to manage the corporation’s affairs. In contrast, an LLLP has general partners who manage the business and limited partners who are passive investors.
Another key difference is the level of liability protection provided to the owners. In a corporation, the shareholders are not personally liable for the corporation’s debts and obligations. In contrast, the general partners in an LLLP are usually personally liable for the partnership’s debts and obligations. However, if the partnership is structured as an LLLP, the general partners can enjoy some limited liability protection.
Taxation is another area where the two differ. A corporation is subject to double taxation, meaning it pays taxes on its income, and then the shareholders pay taxes on any dividends they receive. In contrast, an LLLP, like a partnership, is a pass-through entity, meaning that the income and losses of the partnership are passed through to the partners and are taxed only once at the individual level.
Finally, the requirements for forming and maintaining a corporation or an LLLP can also differ. For example, corporations must hold annual meetings, keep detailed records, and file annual reports with the state. LLLPs may have different filing requirements and may not have the same formalities as corporations.
What are Some Differences Between an LLC and a Limited Liability Limited Partnership?
One of the main differences between a limited liability company (LLC) and a limited liability limited partnership is its ownership structure. In an LLC, the business is owned by one or more individuals called members. In an LLLP, the business is owned by one or more general partners, who are responsible for running the business, and one or more limited partners, who are investors and do not participate in managing the business.
Another difference is the level of liability protection provided to the owners. In an LLC, all members have limited liability protection, meaning their personal assets are protected from the company’s liabilities. In an LLLP, only the general partners have limited liability protection, while the limited partners are only liable for their investments.
In terms of taxation, LLCs are usually taxed as pass-through entities, meaning the profits and losses of the company are passed through to the members and taxed on their individual tax returns. LLLPs also often have pass-through taxation but can be subject to different tax treatments depending on the state and the business circumstances.
The formation and maintenance requirements for LLCs and LLLPs can also differ. For example, some states may require annual reports and fees for both entities, while others may only require it for one or the other.
How is a Limited Liability Limited Partnership Created?
LLLPs are not yet widely available as they are the newest type of business entity. States that have adopted LLLP legislation have specific requirements for forming an LLLP. There are typically two options for forming an LLLP.
First, a state may have a statute that directly authorizes the creation of an LLLP. The requirements for forming an LLLP under this statute will vary by state but usually include filing articles of organization and paying a fee to the state.
Second, an LP can file for limited liability protection for its general partners, converting it into an LLLP. The requirements for making this conversion will also vary by state but usually involve amending the LP’s partnership agreement to include the limited liability provisions required for LLLPs.
Do I Need to Hire an Attorney for Help with Creating My LLLP?
Choosing the right type of business entity for your organization is a critical decision that can impact your business’s success in the long run. Consulting with a local corporate attorney who handles business formation can be invaluable in helping you evaluate your options and choose the best entity for your business.
An experienced attorney can guide the pros and cons of each type of entity and the legal and tax implications associated with each choice. They can also assist you in completing and filing the necessary paperwork with your state, which can help ensure that you comply with all legal requirements.
A business attorney can also help you develop an operating agreement, bylaws, and other essential documents for properly structuring your business entity.
By working with an attorney on LegalMatch, you can help ensure that your business is structured to provide the legal protection you need while maximizing your potential for success.