LLLP: Everything You Need to Know
An LLLP is a newer form of conducting business. It is a type of limited partnership – which has two or more general partners and two or more limited partners.2 min read
An LLLP is a newer form of conducting business. It is a type of limited partnership – which has two or more general partners and two or more limited partners – however, the liability of the general partners in the LLLP is limited. General partners are the individuals who manage the partnership, while limited partners are individuals who are only involved in the financial aspects of the business.
LLLPs are not that common for the simple fact that they are a newer form of business. The older types – corporations, LLCs, and partnerships – are the most common. In fact, the majority of states do not even provide for the creation of an LLLP. There are only twenty one states that have laws providing for this type of business. Others require that the business is formed like a limited partnership with limited liability protection that has to be renewed on a yearly basis.
Prior to the creation of an LLLP, owners would create a business – typically in the form of a limited liability company or corporation – to act as the general partner so that the risk of liability was minimized. Now that we have LLLPs, there is no longer a need for an owner to pursue this approach.
Advantages of an LLLP
One of the biggest advantages of an LLLP is that it shields the general partners from being held personally liable when the partnership is involved in litigation.
LLLPs carry all of the same privileges as a regular limited partnership. LLLPs also provides protection to a partner’s personal assets. Thus, when the partners themselves are sued, the partnership’s assets are protected from being taken by the creditor coming after the partner.
Disadvantages of an LLLP
As stated above, the majority of states do not explicitly provide for an LLLP, and some do not even allow the creation of one, which means there is no way to legally recognize such a business and the asset protection it provides.
Because LLLPs are a fairly new type of business structure, there is not that much legal precedent that has interpreted the authorizing laws.
In a majority of states, a limited partnership can be transformed into an LLLP by a vote of its members to amend the partnership. The new LLLP can continue as if the same legal body it was before. However, only twenty one states have authorizing laws allowing LLLPs, so if a business wants to transform into one, it should make sure it is in a state that allows this type of business.
If you need help forming an LLLP, you can post your legal need on UpCounsel’s marketplace.