How to Form a LLP in Louisiana

When creating a business, proprietors have numerous options for structuring their company, such as making a limited liability company (LLC), a corporation, or a limited liability partnership (LLP).

Why Are LLPs Desirable?

An LLP presents protection to all owners or general partners by restricting their responsibilities while nevertheless giving them the capability to share control of the company equally. A partner in an LLP is exclusively responsible for the number of funds they put into the company. Even though they are not responsible for the LLP, a partner still has the opportunity to participate in the company’s management substantially.

What is an LLP?

Partnerships are one of the multiple types of business entities. An LLP is different from a general partnership. Partners in a limited liability partnership (LLP) are not personally responsible for some of the business’s monetary responsibilities. Professional service firms (law and accounting firms) often develop LLPs. Yet, in Louisiana, any company can register as an LLP.

The methodology of creating a limited liability partnership differs from state to state. In Louisiana, the Secretary of State is accountable for registering limited liability partnerships.

What are the Necessities for Creating a Limited Liability Partnership in Louisiana?

Unlike some states, any business can become an LLP in Louisiana. LLPs are technically called registered limited liability partnerships or RLLPs in Louisiana. Regardless, LLPs must have at least two partners. A sole proprietor can’t create an LLP. LLP registration must be renewed yearly. Louisiana differs from most states because their LLPs do not have to designate a registered agent.

Suppose your partnership uses an assumed name (something different than the partners’ names). In that case, you must register the business’ name with the state. Further, you must select your business’ limited liability partnership status by placing “LLP” or “RLLP” after its name.

What Kinds of Paperwork Do I Need to Fill Out to Begin a Limited Liability Partnership?

To form a limited liability partnership, you must file an Application for Registration of a Registered Limited Liability Partnership with the Secretary of State. Limited liability partnerships can submit this form online or through the mail.

You must include the following info on your Application for Registration:

• The title of your partnership,
• Your partnership’s last name (if appropriate),
• Whether your LLP has a partnership agreement on file with the Secretary of State,
• The company’ immediate street address,
• The kind of company you run,
• Your number of partners,
• The names and addresses of at least two partners, and

The signature of at least one partner.

You may be required to file more paperwork if you intend on running your business underneath an assumed name.

In addition to your state filing, you should think about preparing a partnership agreement. A partnership agreement specifies the privileges and obligations of your partners. For instance, a partnership agreement may detail the processes for allocating earnings, adding partners, or terminating the partnership. Maintaining a written partnership agreement can stop long litigation if a dispute arises.

What Benefits Does Louisiana Offer to Limited Liability Partnerships?

Limited liability partnerships have specific benefits. An LLP does not have to pay income taxes. Rather, its income passes through to its partners, who must report it to the IRS and pay taxes.

Partners may not be personally responsible for the other partners’ negligence and wrongdoing. In other terms, you may not be financially liable if another partner is sued for malpractice or other wrongful acts.

What Are the Disadvantages of Starting a Louisiana LLP?

Louisiana does not shield LLP partners from every business liability. Unlike numerous other states, LLP partners can be responsible for many of the business’s obligations and financial debts. Partners are only shielded against deficits and judgments stemming from another partner’s negligence or misconduct.

A partner’s personal assets can be seized to collect debts or judgment against the LLP. If you create a limited liability partnership, partners should especially think about buying liability insurance to counteract this danger.

If you are worried about liability, think of starting a limited liability company (LLC) or S corporation rather. These business entities may provide owners with more security.

Nonetheless, other regulations and policies involve LLCs and corporations in Louisiana. A business lawyer can support you in determining which business format is most suitable for you.

What Are the Different Kinds of Partnerships? What Should My Liability & Tax Considerations Be?

Partnership revenue is usually taxed on the partners’ personal returns. Some Louisiana partnerships may be mandated to file an annual report. The Internal Revenue Service conducts the Federal taxation provisions for partnerships.

Personal liability is a critical matter to consider when beginning a business. Personal liability is the owners’ personal responsibility for the business’s debts and obligations. Some partnership agreements give liability protection for their owners, allowing them to shelter their personal assets from the company. For instance, if your partnership is beaten in a lawsuit and has to expend a colossal cost, personal liability will assist in guarding your home, money, and savings against the settlement.

This protection will not apply in all cases, such as paying taxes, committing fraud, or violating the partnership’s liability protection.

The kinds of partnerships available in Louisiana are compared below, with details highlighting liability and tax references differences.

What is a General Partnership (GP)?

The general partnership is the most straightforward partnership. It furnishes no liability protection and isn’t bound by many rules, offering maximum liberty to do business as you want.

General partnerships supply no liability protection. Each partner is personally responsible for the organization’s debts.

A partner’s personal assets, such as their home or finances, can be taken to recompense business debts.

Income from the company passes through to a partner’s personal income, where it is taxed as income.

General partnerships are absolved from multiple rules involving the company’s name, function, and uphold. General partnerships usually don’t need much-complicated paperwork.

What is a Limited Partnership (LP)?

Limited partnerships are comparative to general partnerships, but limited partnerships offer two categories of partners: limited and general partners.

Limited partners are not allowed to run the company’s day-to-day operations but obtain personal liability protection.

Limited partners are exclusively liable for the money they’ve invested into the business.

General partners are completely accountable for the business debts, but they handle day-to-day operations.

Limited partnerships are taxed as a pass-through entity, like a general partnership.

Limited partnerships mainly prevail with partners who want to draw outside investors that generally act as limited partners. These outside investors are generally protected from the business’s obligations and debts.

More Info About Limited Liability Partnerships

Partners can’t be held responsible for other partners’ mistakes, errors, or outright scams in limited liability partnerships. These partnerships are highly dominant among experts who expect to bear multiple liability risks resulting from lawsuits, such as doctors and attorneys. For instance, if eight dentists form an LLP and one is sued for malpractice and loses a costly lawsuit, the other dentists won’t be personally liable for paying off that debt.

LLPs are similar to general partnerships, but each partner is solely responsible for their investment.

Each partner is protected from the other partners’ obligations and debts in LLPs.

What is a Limited Liability Limited Partnership (LLLP) in Louisiana?

Limited liability limited partnerships combine the benefits of an LP and LLP. An LLLP has general and limited partners, but they are all protected from each other’s obligations, mistakes, and legal responsibilities. Like an LLP, the LLLP is prevalent among high-risk professions pursuing outside investment.

LLLPs are similar to an LLP wherein each individual partner is not accountable for the others’ liability.

LLLPs still have two classes of partners. They are dubbed general and limited partners. The general partners manage the day to day operations, and limited partners are more like silent investors.

LLLPs are taxed as a pass-through entity.

Should I Hire a Lawyer?

While completing a form is a simple process, a lot more goes into structuring a limited liability partnership. For example, you should create a legally binding partnership agreement, evaluate liability insurance policies, and have ongoing legal obligations. A Louisiana corporate lawyer can help you follow the correct procedures and protect your financial interests.