Why Might I Need a California Limited Liability Partnership or LLP?


Colegio del Mundo Unido. Comillas

A California Limited Liability Partnership (LLP) is a form of partnership that, in California, can only be used by certain licensed professionals, specifically doctors, lawyers and architects.

Registration

Before registering a Limited Liability Partnership, with the California Secretary of State, you should be sure that no other Limited Liability Partnerships by the same name exist in California.  After you have satisfied yourself that the name you plan to do business as is distinctly different from any other Limited Liability Partnerships, you should file the appropriate forms with the California Secretary of State.  Even is you have already formed a Limited Liability Partnership in another state, if you are doing business or earning income in California you must register your Limited Liability Partnership in California.

Operation

Operating as a Limited Liability Partnership allows each of the partners to actively participate in the day-to-day operations of the partnership while, at the same time, enjoying limited liability protection.  The structure of a LLP is quite flexible and the partners can decide how they want to structure their LLP, make distributions, assign losses, etc.  Also, a Limited Liability Partnership will have a date of termination that is agreed upon by all the partners.  When creating a Limited Liability Partnership you should use care to see that all of the agreements between the partners regarding how the business will run, how profits and losses will be divided, how partners will enter and exit the business are each thoroughly covered in your partnership agreement.  A partnership agreement, however, is not mandatory, but as I have professed again and again, it is better than a good idea to have a well drafted partnership agreement.

Taxation

In California, a Limited Liability Partnership is charged an annual tax of $800, similar to the franchise fee paid by Limited Liability Companies.  The partnership itself does not pay any taxes, instead all income, deductions and credits will be reported on a Schedule K-1 and each partner has responsibility for reporting this information with their personal tax return.

Sometimes it is difficult to understand the best entity for your business, because the entities available can be quite complex you may not want to attempt to form one without the help of a qualified attorney.  If you would like to discuss whether a California Limited Liability Partnership is the correct entity for you, please contact us to schedule a time to discuss your entity selection.