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| Limited Liability Partnerships (LLPs) have become a hot topic among executives looking to maximize their after-tax income and minimize their liability exposure.
Some communications firms, particularly partnerships, may realize significant benefits by converting to an LLP.
However, if you currently do business as a corporation, the tax costs of converting may outweigh the advantages.
LLPs are similar to LLCs in terms of tax treatment.
Significantly, the liability protection is frequently limited only to liabilities arising out of malpractice committed by other partners.
A partner will not be shielded from liabilities arising from contracts or from malpractice committed by that partner or those he or she supervises.
The LLP form is often chosen by professionals in states with legislation that limits the ability of professionals to operate as LLCs.
Flow-through taxation and limited liability are the two greatest advantages of LLPs.
Partnerships can convert to one of these entities fairly easily. The conversion does not result in taxable gain, at least when the partners' or members' interests in the organization's capital, income, and loss remain the same after conversion.
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- DEAR VISITORS, If you want to become familiar with the description and the contents of limited liability partnership formation packages, offered by our company and to find above, what kind of service is included in this or that LLP formation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the LLP incorporation within foreign countries, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen.
Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We are not able to guarantee that any such filing will be acceptable to Secretary of State, nor are there any contractual obligation upon us to do so. If Secretary of State rejects incorporation or other electronic filing, we will credit your account with a full refund and the contract between us will be made void. Secretary of State does not offer a cancellation facility for the incorporation of companies or the electronic filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan Web Site (www.uk-ltd-formation.co.uk) are in Great British pounds.
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 Coddan is a Registered Agent for Delaware LLPs and Limited Liability Companies. Coddan Delaware LLP Formations
A LLP gives the benefits of Limited Liability in that it can protect your existing personal assets, while giving many of the Tax advantages of a sole trader partnership. The LLP will be a separate legal entity and while the LLP itself will be liable for the full extent of its assets the liability of the members will be limited. Under certain circumstances, however, claims for economic loss could be made against individual members who have been negligent. Any such claim would be a civil action outside the contract as the party would have contracted with the LLP.
When choosing a business form, you may want to consider the limited liability partnership (LLP), one of the newest entity options. While the LLP is similar to the limited liability company (LLC), there are some important differences that may make the LLP an inappropriate choice for the small business owner.
In many states, owners of an LLP have only a reduced form of limited liability from the claims of the business's creditors. This "limited shield," as it is sometimes called, does not afford the owners the same protection they would enjoy in either the LLC or the corporation. In addition, in many states, the business interests of the owners of an LLP are afforded less protection from the claims of the owners' personal creditors, as compared to the LLC. Finally, California and New York limit the use of LLPs to professionals, thus eliminating the LLP as a choice for other business owners. (In California, the term "professionals" is defined narrowly to include only lawyers and accountants, further restricting the availability of the LLP there).
Many years ago, the law prohibited professionals such as accountants and lawyers from operating in the corporate form. As a result, virtually all of the largest and oldest CPA and law firms in this country were formed and operated as general partnerships. This, of course, meant that the general partnership had unlimited personal liability for all of the business's debts, but professionals who wanted to form a business with each other had no other choice.
When the law was finally changed to allow professionals to incorporate, many firms were reluctant to make the change for tax reasons, since the federal tax law deems a conversion from one form (partnership) to another form (corporation) a potentially taxable event. In addition, such a conversion would involve re-titling all of the firm's assets from the general partnership to the new corporation. These large general partnerships have offices in every major city in the country, hundreds of partners and millions of dollars of assets. Accordingly, the transfer process alone would be complex and expensive enough to dissuade these forms from making the conversion.
Similarly, it was believed that the Internal Revenue Service might deem conversion from a general partnership to an LLC to be a conversion to another form, and thus a taxable event. Through lobbying by accounting firms, law firms and other professionals operating in the general partnership form, the limited liability partnership (LLP) was developed.
The conversion process from a general partnership to an LLP is unique in the law. The general partnership simply registers as an LLP. Technically, the old entity does not dissolve, and a new entity is not created. The old entity continues to exist, but is now subject to a new set of laws (i.e., those governing the LLP). The conversion does not trigger a taxable event because there is no change in the entity. Moreover, because of this registration process, none of the assets needs to be re-titled, making the conversion especially simple and inexpensive.
- LLPs vs. LLCs: Which is a Better Choice?
This brings up the question of why would you want an LLP over an LLC. In some states, the answer is simple. The professional regulatory body for your profession may prohibit you from forming an LLC, but not an LLP. In a case like this, the LLP at least gives you malpractice protection (compared to running naked in a regular partnership) and may also give you contract liability protection, depending on your particular state.
Even if both LLP and LLC entities are available to you, converting a general partnership to an LLP can potentially be much easier than conversion to an LLC. Many states in their LLP act provide that an existing partnership can convert over simply by paying a fee and registering the existing entity as an LLP (generally with the Secretary of State). In contrast, in many states, the conversion of a general partnership to an LLC will require the liquidation or merger of the old partnership in the process of the formation of the LLC.
While this is certainly not an insurmountable task, few would choose to voluntarily subject themselves to the process if it can be avoided. In states where the ultimate protections afforded an LLP are not different than that of an LLC (i.e., both malpractice and contract liability protection) then there is no good reason to spring for the LLC. However, if you are not in a state that provides contract liability protection for LLPs then converting to an LLC may be worthwhile, even if liquidation of the old partnership is required.
Finally, in a few states (Texas, for example) LLCs are subject to rather harsh entity level taxes like a franchise or excise tax, whereas an LLP is not. This alone will make the decision easy for some people.
Another factor to consider in the formation of an LLP is that some states may require partners to carry malpractice coverage of a certain amount (in California, for example, you must show evidence that you possess "security" of $100,000 per professional). Most of the states that have this type of provision also prohibit licensed professionals from forming LLCs (as does California) so as to channel them into the LLP provisions which will require the insurance coverage.
| Description of service | Order Now | Basic Delaware LLP Formation Package - £289.00
Search name availability for your Delaware Limited Liability Partnership. A Delaware Limited Partnership incorporated within 24-48 hours. Preparation and filing of Certificate of Formation with state office. Our incorporation service and State filing fees. Certified Copy of the Certificate of Formation. A professionally-prepared 20 page Delaware LLP Agreement ready-for-signature by email (Word. format). Minutes or Consents Documentation of Organizational Meeting. | ORDER
| Classic Delaware LLP Formation Package - £364.00
One price includes: search name availability for your Delaware Limited Liability Partnership. Preparation and filing of Certificate of Formation with state office. A Delaware Limited Partnership incorporated within 24-48 hours.. Certified Copy of the Certificate of Formation. Delaware Resident Agent for 12 months. Registered Address in the State of Delaware for 12 months. Delivery Certified Copy of the Certificate of Formation is delivered as hard copy by post. A professionally-prepared 20 page Delaware LLP Agreement ready-for-signature (Word. format). Minutes or Consents Documentation of Organizational Meeting. All the documents mentioned above are only to be printed and signed.
Next Year Fees » £345.00 : Registered Address and Resident Agent Services, Annual Franchise Tax Report Preparation and Annual Franchise Tax Fee. | ORDER
| Basic Arkansas LLP Formation Package - £122.00
Search name availability for your Arkansas Limited Liability Partnership. An Arkansas Limited Partnership incorporated within 24-48 hours. Preparation and filing of Certificate of Formation with state office. Our incorporation service and State filing fees. Certified Copy of the Certificate of Formation. A professionally-prepared 20 page Arkansas LLP Agreement ready-for-signature by email (Word. format). Minutes or Consents Documentation of Organizational Meeting. | ORDER
| Classic Arkansas LLP Formation Package - £197.00
One price includes: search name availability for your Arkansas Limited Liability Partnership. Preparation and filing of Certificate of Formation with state office. A Arkansas Limited Partnership incorporated within 24-48 hours.. Certified Copy of the Certificate of Formation. Arkansas Resident Agent for 12 months. Registered Address in the State of Arkansas for 12 months. Delivery Certified Copy of the Certificate of Formation is delivered as hard copy by post. A professionally-prepared 20 page Arkansas LLP Agreement ready-for-signature (Word. format). Minutes or Consents Documentation of Organizational Meeting. All the documents mentioned above are only to be printed and signed.
Next Year Fees » £199.00 : Registered Address and Resident Agent Services, Annual Franchise Tax Authorised Person and Report Preparation and Annual Franchise Tax Fee. | ORDER
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- LLPs vs. Professional Corporations
When are LLPs a better choice than a Professional Corporation? First, by definition in most states, to have an LLP requires at least two partners (it is a partnership after all). If you are a sole practitioner of your service and desire limited liability, then you will need to form a PC, or if your state licensing board permits it, an LLC.
In cases where there are two or more partners, an LLP will give more flexibility in the distribution of profits compared to a PC. In a PC, corporation law requires profits to be distributed precisely in the ratio of the stock holdings, which in turn are generally proportional to the amount of capital invested. If you have an arrangement where a personalized profit sharing arrangement is desired, then an LLP will give you great flexibility in doing so, compared to the rather demanding restrictions of a Professional Corporation.
It is true that you can adjust the profit payout in a Professional Corporation by giving one owner a higher salary than another, but then you eliminate one the best reasons for forming a PC, which is the ability to reduce FICA taxes through the use of lower but still reasonable salaries.
Many professional organizations desire both reduced FICA taxes and profit sharing flexibility. In other cases, they simply desire to have a common name for marketing purposes and to share office overhead expense, while each owner runs what is essentially their own practice separately.
In cases such as this, a good plan is to form a master LLP or LLC. The owners each form their own Professional Corporation and contract with the master LLP to provide services. Common overhead expenses and billing are run through the LLP and then the remainder of the profit is parceled out through the service contracts to each PC, according to their own actual earnings.
The end result is that FICA taxes are still saved as each owner pays themselves a reasonable salary from the Professional Corporation, and takes the rest as a distribution (not subject to FICA tax). The issue of disparate profit allocation is also solved, as each owner extracts to his Professional Corporation the earnings from his/her own efforts (net of common overhead). This type of arrangement needs to be careful planned, but when done right, it has significant structural advantages that cannot be obtained with either a straight PC or LLP.
| Requirements | LLP | Corporation | General Partnership | Sole Proprietorship | | Number of Owners | Two, minimum | One, minimum | Two, minimum | One, maximum | | Limited Liability | YES | YES | NO | NO | | Management and Control | Decentralized; all partners have equal rights to manage and control business, unless agreement provides otherwise. | Centralized in Board of Directors. | Decentralized; all partners have equal rights to manage and control business, unless agreement provides otherwise. | N/A | | Free Transferability of Interests | Can transfer right to economic interest without consent of others, but cannot so transfer right to participate in management and control. | Absent a buy/sell or other agreement, shares are freely transferable. | Can transfer right to economic interest without consent of others, but cannot so transfer right to participate in management and control. | N/A | | Continuity of Life | For LLPs with no definite term, withdrawal, incapacity, or death of a partner will not cause dissolution unless agreement provides otherwise, or withdrawing partner(s) constitute one-half or more of all partners. | Withdrawal, incapacity, or death of a shareholder does not affect corporation's existence. | For Partnerships with no definite term, withdrawal, incapacity, or death of a partner will not cause dissolution unless agreement provides otherwise, or withdrawing partner(s) constitute one-half or more of all partners. | On incapacity, withdrawal, or death, sole proprietorship ends, but conservator, heirs or estate may continue the business. | | Filings Required to Begin Existence of Entity | File LLP/-1 with Secretary of State. | File Articles of Incorporation with Secretary of State. | Statement of Partnerships Authority may be filed with Secretary of State. | N/A | | Regulation of Entity Name | Must include the words "limited liability partnership" or abbreviation thereof | Business name cannot include the term "architect," "architecture," or "architectural" unless its title of designation includes the full name of a licensed officer or employee, and the fact that such person is an architect. | Same as corporation, except title or description should include name of a licensed general partner, or if partners whose names appear in business name are all licensed, full name or statement disclosing fact of licensure is not required. | Same as corporation, except title or description should include full name of licensed sole proprietor. | | Minimum Insurance or Other Security Required | YES | NO | NO | NO | | Operating Documents | Limited Liability Partnership Agreement. | Bylaws. | Partnership Agreement. | N/A | | Public Disclosure of Owners and Capitalization | Not public information. | Not public information. | Names of partners may be disclosed if fictitious business name statement is published and filed. | Owner's name disclosed if fictitious business name statement is published and filed. | | Applicability of Minimum Franchise Tax | YES | YES | NO | NO | | Dual Level of Income Tax | NO | Yes, for "C" Corporations. | NO | NO | | Qualifying to Do Business in Other States | May present a problem if other states do not recognize LLPs. | All 50 states recognize corporations, although each state will have differing requirements re: licensing of shareholders. | Generally limited to licensing issues. | Generally limited to licensing issues. | | Filings Required to Dissolve Entity | File LLP-4 with Secretary of State. | File election to wind up and dissolve and certificate of dissolution with Secretary of State. | No formal filings required; may file abandonment of fictitious business name. | No formal filings required; may file abandonment of fictitious business name. |
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£ 289.00
To incorporate a LLP in Delaware this package price includes (most popular for USA residents):
Search name availability for your LLP in Delaware
Delaware Resident Agent for 12 months
Helpful Resources