Limited Liability Partnership
A "Limited Liability Partnership" is a partnership that voluntarily registers with the Corporations Division as an LLP. The law specifically allows any partnership to register as an LLP. The primary reason for a partnership to register as an LLP is that the partners in an LLP will not have individual or personal liability for a partnership's debts. By having this liability shield, the partner is placed in a similar position to that of a stockholder in a corporation. In an LLP, the partnership may suffer financially due to a bad business deal, and to that extent a partner's interest in the partnership is worthless, but at least the partner does not have to worry that his or her other assets - such as a home, car, or bank account - can be seized to satisfy the LLP's obligations. This is similar to a corporation. If a corporation is unsucessful its stock might be worthless, but at least the shareholders do not have to pay for the corporation's debts.
An obligation of an LLP is solely the obligation of the LLP. A partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or so acting as a partner.
The LLP registration form is available here. The form requires you to fill out the partnership's name, its location, and its election to be an LLP. Note that an LLP must end its name with "Registered Limited Liability Partnership", "Limited Liability Partnership", "RLLP" or "LLP". The form also asks for the name of your process/registered agent and address. The form must be signed by two partners and sworn to under penalty of perjury. The form is designed to be used by both domestic and foreign LLP and as with other filings a fee is required.
Each LLP is required to file an annual report with the Secretary of State, between January 1 and April 1 of each year and pay the required fee. If the annual report is not filed, in a timely manner, the LLP could be terminated. A partnership whose statement of qualification has been revoked may apply to the Secretary of State for reinstatement within two years after the effective date of the revocation.
Whether you opt for a general partnership or an LLP, the operation of a partnership will always involve federal and state tax issues. These issues relate to how assets and expenses are accounted for on your federal and state income tax returns. It is generally a good idea to consult with an attorney or an accountant as you plan your business. Click here T.11,Ch.022 to review the statute relating to LLP's.