Limited liability partnership
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| Business law |
|---|
| Business organizations |
| Basic forms: |
| Sole proprietorship |
| Corporation |
| Partnership (General · Limited · LLP) |
| Cooperative |
| USA: |
| Business trust · LLC · LLLP Delaware corporation Nevada corporation |
| UK/Commonwealth: |
| Limited company (By shares · By guarantee) (Public · Proprietary) |
| Civil law countries: |
| AB · AG · ANS · A/S · GmbH |
| K.K. · N.V. · OY · S.A. |
| European Company Statute |
| Doctrines |
| Corporate governance |
| Limited liability · Ultra vires |
| Business judgment rule |
| De facto corporation and corporation by estoppel |
| Piercing the corporate veil |
| Related areas of law |
| Contract · Civil procedure |
A limited liability partnership (LLP) is a form of business organization combining elements of partnerships and corporations. In an LLP, all partners have a form of limited liability, similar to that of the shareholders of a corporation. However, the partners have the right to manage the business directly, and (in many areas) a different level of tax liability than in a corporation.
Limited liability partnerships are distinct from limited partnerships, in that limited liability is granted to all partners, not to a subset of non-managing "limited partners." As a result the LLP is more suited for businesses where all investors wish to take an active role in management.
Contents |
[edit] National variations
[edit] United States
In the United States, each individual state has its own law governing their formation. Limited partnerships emerged in the early 1990s: while only two states allowed LLPs in 1992, over forty had adopted LLP statutes by the time LLPs were added to the Uniform Partnership Act in 1996.[1]
Although found in many business fields, the LLP is an especially popular form of organization among professionals, particularly lawyers, accountants and architects. In some U.S. states (including California and New York), LLPs can only be formed for such professional uses.
The liability of the partners varies from state to state. Section 306(c) of the UPA (a standard statute adopted by many states) grants LLPs a form of limited liability similar to that of a corporation:
- An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership. 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.
However, a sizable minority of states only extend such protection against negligence claims, meaning that partners in an LLP can be personally liable for contract and intentional tort claims brought against the LLP.
As in a partnership or limited liability company (LLC), the profits of an LLP are distributed among the partners for tax purposes, avoiding the problem of "double taxation" often found in corporations.
Some US states have combined the LP and LLP forms to create limited liability limited partnerships.
[edit] United Kingdom
In the United Kingdom LLPs are governed by the Limited Liability Partnerships Act 2000. An LLP has full limited liability status for all kinds of debts and liabilities of the LLP. In the UK LLPs have a separate legal personality from the individual partners.
[edit] Japan
Limited liability partnerships (有限責任事業組合 yūgen sekinin jigyō kumiai?) were introduced to Japan in 2005 during a large-scale revamp of the country's laws governing business organizations. Japanese LLPs may be formed for any purpose (although the purpose must be clearly stated in the partnership agreement and cannot be general), have full limited liability and are treated as pass-through entities for tax purposes. However, each partner in an LLP must take an active role in the business, so the model is more suitable for joint ventures and small businesses than for companies in which investors plan to take passive roles.[2][3] Japanese LLPs may not be used by lawyers or accountants, as these professions are required to do business through an unlimited liability entity.[4]
[edit] References
- ^ Addendum to the Prefatory Note, Uniform Partnership Act (1997).
- ^ Hiroaki Kitaoka, Esq., 有限責任事業組合（日本版LLP）（1）：中堅中小企業にも利用価値のある制度 (in Japanese)
- ^ Japanese LLP Act (English translation)
- ^ Ministry of Economy, Trade and Industry, 40 LLP Questions and Answers (in Japanese)
