The answer is no. As the state laws usually implies conditions to a business form that is considered a partnership.

However, is this how you and your partner(s) want your Limited Liability Partnership to be run? Most people choose to have a partnership as they have control and flexibility of their own business. How are you possibly able to do that if you are relying on the statute to guide you on your business decisions?

It is wise to have a meeting with your partners and discuss what your business expectations are and what you hope to achieve. This will not only give you an idea of what each others expectations are but it can reveal any points that there maybe of possible conflict and deal with them before you even form your partnership.

You do not have to spend extortionate amounts of money to have a partnership agreement drawn up. If you and your partners can come together and note down those matters that are important to you and what you have agreed you can have it drafted easily by online legal document drafters at a fraction of the cost.

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Well its relatively simple compared to a Corporation, as you do not have to hold formal meeting for the directors and the shareholders or take minutes. However, a partnership relies heavily on what was agreed in the Partnership Agreement. Therefore, the partners may prepare minutes and agree to have regular meetings for the smooth running of their business.

As is required for a Corporation an LLP is not required to report its accounts, which is open to public inspection. This is usually a great relief to the small as it maintains business privacy.

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An LLP has a further advantage over an LLC, in respect of taxes. You will not be subjected to double taxation, in which your business is taxed and then you are also taxed for the profits you take out of the business, in effect being taxed twice. Instead, in a Limited Liability Partnership the profits and losses are passed through to the individual partners who then file there own tax return forms.

However, an LLP still has to file a tax return for the partnership you do not pay any taxes on the profits as this will be dealt with by the individual tax returns.

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A Limited Liability Partnership or LLP can be used by most businesses but is commonly used if you are an accountant, architects or lawyer as these types of businesses were not allowed to form Corporations due to the fact that the shareholders have a say in the business which is not ideal in professions that need to be personally licensed. A LLP remains within the control of partners and they are responsible for every aspect of the business.

Also if you want to limit your losses of your business to just your investments you can use an LLP, in the past certain professionals were personally liable for any losses of the business and there was no way of shielding themselves from creditors, when the Uniform Partnership Act came into force it was welcomed by businesses that wanted to protect their personal belongings from the what happened in their business and limit what they lost to their investments.

You need to look to your individual state legislation as to whether your business can be set up as a Limited Liability Partnership, as most some states only allow professional, for example accountants and lawyers/attorneys, to become a Limited Liability Partnership.

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Limiited Libility Partnership is not considered to be a separate entity for the purposes of income tax — any profits and losses of an LLP are passed through to the partners this avoids double taxation.

A partner in a Limited Liability Partnership is only personally liable for his or her own negligence or that of an employee working under the partner’s direct supervision.

A partner isn’t personally liable for the negligence of anyone else in the firm. However, the partner can not negate liability for a large variety of partnership debts that were not as a result of his or her own negligent act. Any obligations owed to business creditors, lenders and landlords — regardless of which partner incurred the obligation for the partnership is the responsibility of all the partners of an LLP.

What are the Disadvantages of LLP?

Contributions made by the partners to Limited Liability Partnership are owned by the partnership and is no longer recognized as being an individual partners asset. Therefore the assets are only distributed between the partners as specified in the Partnership Agreement.

A partner is able to bind the whole partnership into contracts without the consent of the other partners. Any obligations owed to business creditors, lenders and landlords — regardless of which partner incurred the obligation for the partnership is the responsibility of all the partners of an LLP.

There are complex filing and administrative regulations similar to those of Limited Liability Corporations.

Also some states only allow certain profession to become LLP’s namely accountants, architects, engineering and lawyers.

How do you set up a Limited Liability Partnership?

The partnership must have a name that incorporates LLP or RLLP to the end of it. It then must make an application to register the formation with the Secretary of State.

Do I need an Attorney?

An attorney will be able to set up the LLP up for you, which usually involves a high fee. However you are able to set the business formation up yourself without too much difficulty and save the attorney fees to invest in your business.

Where Can I get the Forms?

You can get the forms from several major legal document providers, but I have seen some great reviews from Legalzoom.com, who are able to provide a range of packages for the formation of your Limited Liability Partnership, depending on how involved you want to be. Find out more about the process of Incorporations & LLC’s

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The process of forming a partnership is quite simple. It is the agreements between the partners that are often complex and time consuming. A partnership is defined as two or more people who must associate together to: carry on a business as co-owners, and to share it’s profits. If the intentions do not meet these requirements than a partnership has not been made. Therefore, it is not necessary for the agreement to be in writing or even expressed verbally for the the business to be called a partnership. When a court looks at the intentions of the parties, it looks like there is an implication of forming a partnership then the business will be qualified as a partnership for legal reasons.

Usually, if the business has instructed a lawyer at sometime during formation, the parties could have been strongly advised to create a Partnership Agreement. When parties are going into business together the do not think it is necessary to have an agreement as they already agree on how the business should be run, the profits shared, the contributions to be made and where the business should be in the future. The problems arise in the future and that is where the partnership agreement is an invaluable tool, as it will be first thing that your lawyer will ask for and base his case on. This stops the “he said she said” problem as inevitable over time, what was discussed initially becomes forgotten or misinterpreted at the time and escalates to a court case.

There are three types of partnership agreements that you can have:

1.  General Partnership
A general partnership is a business entity in which the partners own the business assets together. Unless a partnership agreement states otherwise, business profits and losses are shared by the partners equally, and each general partner has an equal right to participate in management and control of the business. It will be more common for the a partnership agreement provide for the manner in which profits and losses are to be shared.

2.  Limited Partnership

This business entity is exactly the same as a general partnership however one or more general partners manage the business while “limited” partners provide capital and share in the profits but take no part in running the business. In a limited partnership there must be at least one general partner who has unlimited personal liability.

This situation is very similar to an incorporated business, the shareholders are the investors and the directors are the general partners.

3.  Limited Liability Partnership

Limited liability partnership is a business structure that allows businesses to operate and function as a partnership while giving it the status of a separate legal person. LLP will be regarded in law as “bodies corporate” which is formed by being registered. Legal Documents @ Lawyer-Free Prices
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