limited liability partnership

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Limited Liability Partnership

A form of general partnership that provides an individual partner protection against personal liability for certain partnership obligations.

The Limited Liability Partnership (LLP) is essentially a general partnership in form, with one important difference. Unlike a general partnership, in which individual partners are liable for the partnership's debts and obligations, an LLP provides each of its individual partners protection against personal liability for certain partnership liabilities.

In 1991 Texas enacted the first LLP statute, largely in response to the liability that had been imposed on partners in partnerships sued by government agencies in relation to massive savings and loan failures in the 1980s. The Texas statute protected partners from personal liability for claims related to a copartner's Negligence, error, omission, Incompetency, or malfeasance. It also permanently limited the personal liability of a partner for the errors, omissions, incompetence, or negligence of the partnership's employees or other agents. By the mid-1990s, at least twenty-one states and the District of Columbia had adopted LLP statutes.

The limit of an individual partner's liability depends on the scope of the state's LLP legislation. Many states provide protection only against tort claims and do not extend protection to a partner's own negligence or incompetence or to the partner's involvement in supervising wrongful conduct. Other states provide broad protection, including protection against contractual claims brought by the partnership's creditors. For example, Minnesota enacted an expansive LLP statute in 1994. This piece of legislation provided that a partner in an LLP was not liable to a creditor or for any obligation of the partnership. It further provided, however, that a partner was personally liable to the partnership and copartners for any breach of duty, and also allowed a creditor or other claimant to pierce the limited liability shield of a partner in the same way a claimant may pierce the corporate veil of a corporation and personally sue an individual member of the corporation.

In states that recognize LLPs, a partnership qualifies as an LLP by registering with the appropriate state authority and fulfilling various requirements. Some states require proof that the partnership has obtained adequate liability insurance or has adequate assets to satisfy potential claims. All states require a filing fee for registration and also require that an LLP include the words Registered Limited Liability Partnership or the abbreviation LLP in its name.

A partnership that renders specific professional services may form an LLP and register as a professional limited liability partnership (PLLP). A PLLP is generally the same as an LLP except that it is an association solely of professionals. Each state specifies the qualifying professions for a PLLP. This business form is typically available to attorneys, physicians, architects, dentists, engineers, and accountants. New York's LLP statute restricts eligibility solely to partnerships that render professional services.

Further readings

American Law Institute–American Bar Association (ALI ABA) Committee on Continuing Professional Education. 1996. Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy. 12th ed. Vol. 1. Philadelphia: ALI-ABA.

Bromberg, Alan, and Larry Ribstein. 1995. Limited Liability Partnerships and the Revised Uniform Partnership Act. Boston: Little, Brown.

Callison, J. William. 1995. Partnership Law and Practice. New York: McGraw-Hill.

Dickerson, Claire Moore. 1991. Partnership Law Adviser. New York: Practising Law Institute.

limited liability partnership

a new kind of legal entity through which business maybe carried on in the UK, brought into effect on 6 April 2001. It is a cross between the limited company and the partnership. It permits two or more people to combine to carry on business in partnership but gives them the benefit, which normal partnership does not, of limiting their liability to creditors. The limited liability partnership is a separate entity from its partners and has to be registered with the Registrar of Companies.
References in periodicals archive ?
The proposed Limited Liability Partnership Regulations are broadly aligned with the UK Limited Liability Partnership Act regime.
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Clumsy legislation - following the Government's climb-down after it intended to enforce a new flat rate 18 per cent on capital gains - means that family businesses could fare much better than sole or dual ownership operations and limited liability partnerships are expected to grow in popularity.
Bromberg and Ribstein on limited liability partnerships, the revised Uniform Partnership Act, and the Uniform Limited Partnership Act (2001), 2006 ed.
The event also included presentations by Grant Thornton on mergers, limited liability partnerships and wealth management.
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MANY limited liability partnerships (LLPs) in the Midlands' professional services sector could be affected by swingeing changes to the way they are taxed.
Whittaker and Machell, both attorneys in the UK, describe the law of limited liability partnerships in the UK, with a focus on the law in England and Wales, although the book may be useful to those in Scotland and Northern Ireland.
Only limited liability partnerships can use Limited liability partnership or LLP.

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