By Fredrick P. Niemann, Esq. of Hanlon Niemann, a Freehold, NJ Partnership Attorney
What is a Limited Liability Partnership?
A limited liability partnership (LLP) is a form of general partnership which, under New Jersey law, limits the liability of individual partners, for certain kinds of debts and obligations.
An LLP is distinguished from a general partnership in that partners of a general partnership are jointly and severally liable for partnership tort liabilities and jointly and severally liable for all partnership debts and other obligations.
The partners of a limited liability partnership (LLP) are not liable, either individually or jointly, for debts, obligations and liabilities of the partnership whether in tort, contract or otherwise, which arise “from negligence, omissions, malpractice, wrongful acts or misconduct” committed while the partnership is a limited liability partnership and in the course of the partnership’s business, by another partner or an employee, agent or representative of the limited liability partnership who is not under the direct control and supervision of the partner. But take note, an individual partner of a limited liability partnership remains personally liable for his or its own negligence, omissions, malpractice, wrongful acts or misconduct and those of any persons under the partner’s direct supervision and control. This same rule applies regardless of whether you select a corporation, LLC, partnership or sole proprietorship as the means of conducting business.
How to Form a Limited Liability Partnership
In order to become a limited liability partnership, a member of the partnership must file with the New Jersey Secretary of State an application of formation listing the name of the partnership, the address of the principal representative of the partnership, its registered office, the name of the registered agent for legal service of process, a brief statement of the business of the partnership and any other matters which the partnership decides should be included in the statement. Most importantly, the partnership must apply for status as a limited liability partnership. A filing fee will be charged by the New Jersey Secretary of State. The application must be executed by a majority in interest of the partners or by one or more of the partners authorized to execute the application. The name of the partnership must contain at the end of the name the words “Limited Liability Partnership” or the abbreviations “L.L.P.” or “LLP.” On an annual basis, a limited liability partnership must file reports with the New Jersey Secretary of State and pay an annual filing fee.
It seems to me that many existing general partnerships can and should elect their status to be a limited liability partnership. The process is easy and low cost. Conceptually, a general partnership making such an election does not become a new legal entity and, therefore, there should not be a need for the partnership to transfer assets to the new entity and the like. But there may be some additional housekeeping requirements that lenders may require or prohibit like name changes, or changes in the form of business operation. Further, the designation at the end of the general partnership’s name as a “Limited Liability Partnership” or “LLP” might suggest the need for amendments to filed Uniform Commercial Code financing statements.
To discuss partnership issues and questions in NJ, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org/. Please ask us about our video conferencing consultations if you are unable to come to our office.