LLC Limited Partnership: Everything You Need to Know
An LLC limited partnership offers business owners the benefits of corporations and sole proprietorships. Each member has limited liability. 3 min read
2. Advantages of LLC Limited Partnership
3. Disadvantages of LLC Limited Partnership
4. Frequently Asked Questions About LLC Limited Partnership
What Is LLC Limited Partnership?
An LLC limited partnership offers business owners the benefits of corporations and sole proprietorships. Each member has limited liability. LLPs are formed by professional businesses, such as law firms and medical practices, and may include silent partners. LLCs are the most popular form of business in Delaware, a state known for its beneficial business environment.
Advantages of LLC Limited Partnership
LLC limited partnerships have the following features:
- Flexible management structure
- Unlimited number of members
- Pass-through tax status
- Fewer reporting requirements
- The ability to distribute funds as they see fit without being restricted by the size of each shareholder's contribution
- Protections for your personal assets
Limited partnerships offer additional benefits:
- Attract investors because of the added protection.
- Members can pool their resources without contacting an outside investor.
- Limited partnerships can outlive its members. When a partner leaves, the LP can continue if it has the appropriate structure and that member is not a critical staff member.
Disadvantages of LLC Limited Partnership
- LLCs do not have a rigid organizational structure, which limits the management team's ability to make decisions.
- LLCs are tied to their owners, and they are dissolved if that owner leaves for any reason unless there is a provision for passing ownership of the LLC to a new owner at that time.
- You may not be able to start an LLC in your state unless you meet specific profession criteria.
- Each state treats LLCs differently on their taxes, which can make it difficult to stay competitive or to file taxes.
- General partners assume the vast majority of the risk since they are directly responsible for the businesses' obligations.
Frequently Asked Questions About LLC Limited Partnership
- Are there restrictions on who can form an LLC?
The restrictions on who can form an LLC are minimal, meaning individuals, groups, and other business entities can have ownership in an LLC.
- How many partners do I need to form an LLC?
You do not need partners if you are forming an LLC. You can form an LLC by yourself if you would like to. However, the amount of paperwork and other factors means that you should look into having partners if possible since they can help you avoid some of the liability.
- I already formed with a different business type, can I change it to an LLC?
- In an LLC, who is in charge?
The management of an LLC is determined by the partners. In general, limited partnerships have at least one general partner combined with other limited partners. The general partner tends to hold a stronger leadership position within the company as the general partner(s) are responsible for the company's partner obligations. Limited partners have far less input for operations since they have a minimal amount of risk associated with the company.
- Do limited partners influence the operations of the company?
While limited partners do not participate directly in the company's management, they can influence it by influencing the general partner. Limited partners have little impact on company operations beyond helping the general partner in indirect means, but they do get a share of the company's profits since they are investors.
- Is it possible to form a company with multiple owners that is not an LLC?
In many places, it is possible to form a company that has multiple owners without being an LLC. However, there are some states that require companies with multiple owners to file as an LLC to start their companies. This ensures that these new businesses will have the protections that corporations have while enabling them to last longer and continue to grow. The LLC structure is generally good for small and medium-size businesses since there are low overhead costs and facility costs.
- What paperwork do LLCs file every year?
LLCs have to report on their revenue and earnings using the IRS Form 1065. This process is done in collaboration with the Secretary of State for their state.
- What type of structure do LLCs use?
LLCs allow you to choose any business structure that you like for your company.
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