A Limited Liability Limited Partnership (LLLP) is a relatively recent modification of a traditional limited partnership, and about half of the states in the U.S. have adopted statutes for their formation. In this article, I will highlight some of the most prominent features of the LLLPs.
As I already mentioned above, LLLPs are a modification of limited partnerships. By definition, limited partnerships consist of one or more general partners, and one or more limited partners. In a standard limited partnership, the general partners have joint and several liability for the debts and obligations of the limited partnership, whereas limited partners will not have such liability for these debts and obligations beyond any amount of their capital contributions.
In contrast, in an LLLP, general partners will also have limited liability for the debts and obligations of the limited partnership that arise during the time that the LLLP form is elected. Thus, general partners in an LLLP may have significantly less liability, and are not likely to be personally liable for the debts and obligations of the partnership; rather, the liability of a general partner is limited to the amount of his capital contribution.
Despite the differences in the liability, LLLPs are usually managed in a manner similar to the LPs – in an LLLP, general partners usually manage the partnership, while limited partners only have a financial interest. Similarly, tax-wise, an LLLP election has no effect on the pass-through taxation aspects of a partnership.
As noted above, only about half the states allow for an LLLP form; therefore, you need to check your local statutes to see if you have an option to make such an election. In practice, LLLPs are often formed by converting existing limited partnerships into such a form (in order to take advantage of the benefits of an LLLP).
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Forming partnerships, LLPs, LLLPs, and other similar business entities involve complex issues, and often legal issues arise that necessitate experienced planning beyond merely the formation of an entity. This article only attempts to provide a general background information that should not be relied upon in making the determination of your specific situation. Please contact Sherayzen Law Office for legal help with this issue. Our experienced business firm will guide you through the complex web of rules concerning business partnerships and their various forms (general, LPs, LLLPs, et cetera).