Forming An LLP In California
In California, licensed professionals can form a business surrounding their professional services by forming a limited liability partnership. This is the most beneficial, and in some cases only choice, for these professionals in terms of legal protections and services that they will receive. The only licensed professionals that can form an LLP in California are lawyers, public accountants, and architects.
In an LLP, all of the partners are limited partners, meaning they all receive limited liability protection in case of lawsuits against another member of the firm. For example, if the limited liability partnership consists of lawyers and one of them is sued for malpractice and loses the case, not all of the partners at the firm are held liable for that malpractice. Furthermore, individual partners in a limited liability partnership are not held accountable for the debts of the LLP as a whole. Additionally, an LLP does not pay an income tax; however, they must pay an annual tax of $800.
The following is a guideline to forming an LLP in California. First, licensed professionals looking to form a limited liability partnership must include “limited liability partnership” or an appropriate abbreviation of it in the name of the business. Oncethis has been satisfied, they must file a Registration with the California Secretary of State. Some professions require an additional and separate filing. The Registration must include the following information: the name and street/mailing address of the LLP’s office, name and address of the registered agent, a few comments regarding the nature of the business, and a written acknowledgment of registering a limited liability partnership.
The limited liability partnership must have a registered agent, that can be an individual or a corporation, that will handle the legal papers at the behest of the limited liability partnership. Furthermore, the limited liability partnership is required to have a federal Employer Identification Number, regardless of how many employees it may employ. Additionally, California requires LLPs to have the most suitable malpractice insurance for its practice. A limited liability partnership that provides legal services, depending on the number of lawyers it employs, can pay a minimum policy of $1 million up to a maximum of $7.5 million.
Recommendations Regarding LLP
Given the complexities of California laws regarding LLPs, it is absolutely recommended to speak with a lawyer before attempting to register as a limited liability partnership. A lawyer can guide a newly forming business as to which legal entity is best suited to their needs, and can aid in the application process for acquiring the necessary legal credentials.