A limited liability partnership (LLP) is a type of business arrangement that allows the individual partners to be free from the debts and liabilities of all of the other partners, as well as from certain debts and liabilities of the partnership. In an action brought against the partnership as a whole, no single partner is personally liable. In this way, it differs from a general partnership, in which all partners are liable for the partnership’s debts and obligations.
A limited liability partnership is similar to a general partnership in that all partners can actively participate in the management of the business, and losses and gains from the business are passed through to the partners according to their partnership agreement. In California, New York, Oregon, and Nevada, only individuals who are licensed to practice public accounting, law, or architecture, can structure their business as an LLP.
While the partners in an LLP are not liable for their co-partners’ acts of negligence or misconduct, they are personally liable for their own negligent acts. The partners are only shielded from individual liability when the wrongful behavior was committed by the partnership itself (which exists as a separate legal entity from its constituent members) or by other partners.
A limited liability partnership may sue, in its own capacity, individual partners. This could include actions for breaching the partnership agreement, or causing harm to the partnership. An individual partner may also sue the partnership in order to enforce the partnership agreement, or to enforce his or her right to relevant information about the partnership, and his or her rights to an equal share of profits generated by the business.
As to lawsuits between partners, there are no special rules when the partner is suing another partner for conduct that had nothing to do with the partnership (for example, if one partner hit the other with his car). However, if the partner acted with the authority of the partnership against another partner personally, the injured partner will likely sue the partnership.
If you are considering structuring your business as an LLP, and would like some advice on forming an LLP, you should consult a business attorney.