Limited Liability Partnership
A limited liability partnership is formed when a licensed professional wants to form a business surrounding their professional services. Professionals that form a limited liability partnership (LLPs) benefit from legal protections and services. In California, the only licensed professionals that can form an LLP are lawyers, public accountants, and architects.
Partners in an LLP are considered limited partners– they all receive limited liability protection in case of lawsuits against other members of the firm. For example, if one lawyer in a company is sued for malpractice, not all members of the firm are held liable for that malpractice. In addition, individual partners are not responsible for the debts of the LLP as a whole. An LLP does not pay income taxes, but instead are charged an annual tax of $800.
How do you form an LLP? When forming an LLP, a business first must include the title in the name of the business. Once completed, they must file a registration with the California Secretary of State. Registration must include: address of LLP office, registered agent’s information, description of business, and a written acknowledgment of registering a limited liability partnership.
A registered agent is an individual or corporation that handles all the legal papers for the LLP. A LLP is required to have a federal Employer Identification Number (regardless of employee amount). In California, LLPs must have malpractice insurance.
California has some of the most complex regulations when it comes to LLPs. When forming and establishing an LLP in California, it is highly recommended to get legal guidance. A lawyer can not only advise on the best suited legal entity for their business, but aid in the application process for necessary legal credentials.