LLPs grew out of gen partnership law.  So when you are looking for the law sometimes it will be subsumed under gen partnership

How do you create an LLP?

How do you determine if your business is eligible to become an LLP?

LLPs are creatures of statute that needs to have a filing to come into existence. Must look at state statute to  see what kinds of businesses may be formed as llps.

Some states are partial shield states- if a partner signed a k all the partners, wherever located would be peronsally liable. But if the partner committed a tort, only that partner would be liable.

Full shield states (the majority of states) whether being k or tort, partners will only be liable if they knew about the actions and they didn’t do anything about it, then you will be held liable. If you didn’t know about it, you won’t be held liable. So it makes it a big duty to make sure the partners supervise those who work under them.

This prevents firm collapse when one partner does something wrong. Keeps all partners from being held liable.

Yes, only  lawyers can partners but other people can still share profits and 401ks.

After the banking collapse of the 1980s, texas enacted a law to prevent law firms from being brought down when an associated bank falls.

In the beginning, they only wanted the lawyers to be liable for their own malfeasance. This firewalled off partners who were not involved in the action to maintain their personal liability

Architects, lawyers, doctors, accounting firms can all set up llps. LLPs are typically professrionals. All partners in LLP’s must be licensed professional.  

Joint liability

vs. Joint and several liablity

If you’re jointly liable you are liable for everything, whether its something someone else did/paid in .

If you are severally liable, you are only what you paid in/your own actions.

If you are joint and several liable, you could be responsible for the whole thing and then seek contribution from other partners. So the partnership as a whole can be liable or the individual partner may be liable

Yes, If a general partnership wants to become a llp, it files a certificate with the state.

LLP’s are a subset of general liability partners.

1) Taxes are passed through

2) Liability is limited.

3) LLP’s control is a good advantage if small b/c all partners can have control, but for a big firm, then you would need a managing partners

4) Profits and losses are shared

1)  Transferability can be difficult if you want to transfer your management rights but it easier to transfer your right to receive profits.

2) So for llps, formation have to register and pay a fee

For LLP’s if a partner wants to leave  a firm, the firm does not have to dissolve, this is governed by the agreement. A lot of the limited partnership is contractually based.

If there is deadlock and no decisions are being made, then there is a chance things may move to court.