Understanding LLC Partnership in New York
When you’re researching the best form of business entity for your venture, limited liability partnerships (LLPs) might come up2 min read
When you’re researching the best form of business entity for your venture, limited liability partnerships (LLPs) might come up. LLPs are a unique business structure that allows for partners to have varying roles and responsibilities while providing a layer of protection from some liabilities.
LLPs are popular in certain industries, such as law, consulting, or architecture, because they offer the combination of limited liability with the agency benefits of a partnership structure. However, if you’re a new business in the US, particularly in New York, there are several things you must consider before forming a limited liability partnership.
The following is a summary of the top 5 things to consider when forming an LLP in New York:
1. Understand What a Limited Liability Partnership Is
A limited liability partnership—often referred to as an LLP—is a special type of legal business structure that combines the limited-liability benefits of companies with the agency benefits and pass-through taxation of partnerships. Whereas limited liability companies (LLCs) offer stringent separation between personal and business assets, LLPs offer the sole owners the same level of protection from personal liability as a corporation and simultaneously maintain the flexibility of a partnership.
2. Become Familiar with the New York State LLP Law
The New York State provides specific qualifications for businesses that want to form an LLP. It outlines the qualifications for partners, required documents, annual requirements, and conditions that could result in the dissolution of the partnership. It is highly recommended for businesses considering an LLP to become familiar with the state’s LLP law.
3. Seek Legal Advice by Experienced Counsels
The legal and accounting services for setting up an LLP in New York can be overwhelming for many people. To ensure that all of the legal requirements have been met, it is strongly encouraged to work with legal counsel experienced in working with LLPs to ensure that the relationship between partners is clearly defined.
4. Choose and Register a Trade Name
When forming an LLP in New York, partners must choose a name for the business and register with the New York State Department of State. The LLP must include the words “limited liability partnership” and cannot contain the word “corporation,” “incorporated,” or “limited.” The name should also not suggest that the partnership is obtaining a special corporate benefit or is connected with any government agency or organization.
5. Create an Operating Agreement
Drafting an operating agreement is one of the most important steps that the partners must take when forming an LLP. It should include all the necessary details of the business operations, such as the roles and responsibilities of the partners, how responsibilities are divided, how profits will be distributed among partners, and many other details.
By understanding the five important factors discussed above, business owners can make a better informed decision when it comes to forming an LLP in New York State. Of course, understanding complex legal matters varies from case to case and seeking experienced counsel is always highly recommended.