Limited liability limited partnership
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The limited liability limited partnership (LLLP) is a relatively new modification of the limited partnership, a form of business entity recognized under United States commercial law. An LLLP is a limited partnership and as such consists of one or more general partners and one or more limited partners. Typically, while the general partners manage the LLLP, the limited partners' interest is purely financial. Thus, the most common use of a limited partnership is for purposes of investment, often through a number of private equity firms. Despite their lack of control over day to day operations, the limited partners may nonetheless own substantially all of the equity in the partnership.
LLLP versus LP
The difference between an LLLP and a traditional limited partnership lies in the general partner's liability for the debts and obligations of the limited partnership.
In a traditional limited partnership the general partners are jointly and severally liable for its debts and obligations; limited partners are not liable for those debts and obligations beyond the amount of their capital contributions.
In an LLLP, by having the limited partnership make an election under state law, the general partners are afforded limited liability for the debts and obligations of the limited partnership that arise during the period that the LLLP election is in place. Certain LLLP elections take the form of a limited partnership electing to be a limited liability partnership (this is the format used in Delaware, for example) while in other states the election is made in the certificate of limited partnership (examples being Florida, Hawaii and Kentucky). Most states require that an LLLP identify itself in its name, but those requirements are not universal.
Because the LLLP is so new, its use is not widespread. Arkansas, Arizona, Colorado, Delaware, Florida, Georgia, Maryland, Nevada, Texas, and Kentucky have all adopted statutes that allow formation of an LLLP, usually as a conversion of an existing limited partnership (the general partners might want to do this to reduce their legal liability).
The filing fees of an LLLP vs. a limited partnership are at times higher. In the case of Nevada, the Secretary of State charges $75 to register a limited partnership and $100 to register an LLLP. Additionally, the initial and annual report filing for an LLLP in Nevada is $175 vs. $125 for a limited partnership. Conversely, in Kentucky the filing fee for a limited partnership is no higher if the partnership elects to be an LLLP.
LLLPs are most common in the real estate business, although other businesses can also use the form, for example, CNN. There are significant questions about whether the limited liability provided to general partners by the LLLP election will be effective in states that do not have an LLLP statute.
States with LLLP enabling statutes
- North Carolina
- North Dakota
- South Dakota
- US Virgin Islands
Though California does not have a state statute allowing formation of an LLLP, it does recognize LLLPs formed under the laws of another state. While registering an LLLP formed in another state in California will trigger the annual franchise tax of $800—the same as other entities formed in California—the statute governing whether a LLLP must register is somewhat less inclusive than the statute for out-of-state LLCs.
Illinois, though not having an enabling statute, does allow formation of an LLLP under RULPA (Revised Uniform Limited Partnership Act).
- California Franchise Tax Board instructions
- http://www.leginfo.ca.gov/cgi-bin/displaycode?section=rtc&group=17001-18000&file=17935-17937 R&T 17935(a)
- "REVENUE AND TAXATION CODE SECTION 17935-17937". leginfo.ca.gov. Retrieved 27 April 2016.
- Nevada Revised Statutes Chapter 88 (Limited Partnerships) l
- Secretary of State of Nevada Commercial Recordings Fee Schedule