Limited partnerships and limited liability partnerships differ significantly from general partnerships. Though the names are similar, limited partnerships (LPs) and limited liability partnerships (LLPs) are formed by following certain statutes enacted to impart specific characteristics to these business entities. In this article, we will discuss some of the basics of limited partnerships and limited liability partnerships.
Contrary to a general partnership, which is simply a joint venture undertaken by two or more people without the need for a formally created business entity, LPs and LLPs can only be created by following the requirements set forth by statutory law.
First, let’s look at limited partnerships. A limited partnership is formed by two or more people and is distinguished by having at least one limited partner. The next obvious question, then, is what is a limited partner?
A limited partner is not generally liable for the obligations of the partnership. (In contrast to general partners, who are liable for the obligations of the partnership.) The limited partner is only liable to the extent of his capital contributions to the limited partnership. Limited partners can be but are not usually involved in the day to day operations of the limited partnership.
A Pennsylvania limited partnership (LP) can be formed by filing a Certificate of Limited Partnership with the Department of State. The Certificate must contain the following information:
- The limited partnership name. (First ensure the name is available for use.)
- An actual street address is required. In the event the Limited Partnership does not have a street address, a Commercial Registered Office Provider’s (CROP) address is acceptable.
- The Certificate must name all of the general partners. Limited partners do not have to be named.
- The Certificate must be signed by all general partners.
In contrast, a Pennsylvania limited liability partnership (LLP) may be formed by either a general partnership or a limited partnership by claiming LLP status. LLP status provides the general partners with limitations protecting them from personal liability for the negligent misconduct of another partner, but the general partners remain obligated for all other liabilities of the partnership.
LLP status can be claimed by filing an election with the Pennsylvania Department of State Corporations Bureau. The election must state an available name for the LLP and a street address or CROP address. The name of the LLP must contain either “company,” “limited,” or “limited liability partnership” or an abbreviation of one of those terms. To maintain compliance thereafter, the LLP must file an annual registration form and pay the annual fee.
If you need guidance selecting the right type of business entity to meet your goals, or any other matter related to managing your business, the attorneys at the Scolieri Law Group, P.C. can help. Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you, including the formation of a legal business entity if needed. Contact us today at (412)765-0546 or firstname.lastname@example.org.