When starting a business, you can choose from several legal structures. The business structure determines how the business will be taxed, if you will be personally liable for its debts, etc.
Consider forming a partnership if you plan to go into business with others. Partnerships can provide liability protection and simplify tax requirements in some cases.
A partnership is one of the most common types of business entity. Unlike a general partnership, partners in a limited liability partnership (LLP) are not personally liable for some of the business’s financial obligations. Professional service firms (such as law and accounting firms) frequently form LLPs. In Nevada, however, any business can register as an LLP.
The process of forming a limited liability partnership varies from state to state. In Nevada, the Uniform Limited Partnership Act governs the creation and management of LLPs. The Secretary of State is responsible for the registration of limited liability partnerships.
The majority of partnerships are pass-through entities. The company’s income passes through to the owners’ personal income. Nevada does not require a separate partnership tax form. You can find information about federal taxes on the website of the Internal Revenue Service.
When forming a business, it is also important to consider personal liability. Your liability is how many of your personal assets can be seized when the business has to settle a debt. It is also possible to settle your personal debts using your business assets.
A limited liability partnership cannot be held liable for its partners’ mistakes, errors, or outright fraud. Partnerships of this type are very popular among doctors and lawyers, who are likely to take on a lot of liability risk (usually as a result of lawsuits). If three doctors start an LLP and one is sued for malpractice and loses a costly lawsuit, the other doctors will not be liable for the debt.
The partnership is similar to a general partnership, but each partner is only responsible for their investments.
The debts and obligations of each partner are protected.
What Are the Requirements for a Limited Liability Partnership in Nevada?
Unlike some states, any business can become an LLP in Nevada. However, you must have at least two partners (a sole proprietor cannot form an LLP).
Identify a unique business name that reflects your business well and appeals to the types of clients you want to attract. It will need to specify the type of business you’re starting.
You must register your partnership’s name with the state if it operates under an assumed name (something other than the partners’ surnames). Furthermore, your business must be designated as a limited liability partnership by adding “LLP” to its name.
It is possible to protect your business name in Nevada by filing it with the Secretary of State after verifying that it is unique.
Your LLP must also have a registered agent. Registration agents are authorized to accept important documents (such as lawsuit paperwork) on behalf of businesses. A business lawyer can assist in the process of selecting a registered agent.
What Paperwork Do I Need to Form a Limited Liability Partnership?
To create a limited liability partnership, you must file a Certificate of Registration with the Secretary of State. You can submit this form either in person or by mail.
On your registration form, you must provide the following information:
- The name of your partnership,
- The street address of your principal place of business,
- The name, address, and signature of your resident agent,
- The names and addresses of all managing partners,
- Any other provisions the partners want to set out, and
- The signatures of at least one authorized managing partner.
You may have to file additional paperwork if you plan to operate your business under an assumed name.
In addition to your state filing, you should draft a partnership agreement. In a partnership agreement, your partners’ rights and responsibilities are defined. For example, a partnership agreement may set out the procedures for distributing profits, adding partners, or terminating the partnership. Having a written partnership agreement can prevent extended litigation if a dispute occurs.
You’ll need an Employer Identification Number (EIN) from the IRS to hire employees. EINs are useful for opening business bank accounts, credit cards, and more, even if you don’t hire employees. Getting one from the IRS is highly recommended.
To do business, some partnerships need additional licenses from the state. Plumbers, electricians, and other types of contractors must be licensed. Taxes may also need to be added.
Once the Secretary of State approves your paperwork and sends you a certified, stamped copy, you can begin doing business.
The following are a few things to consider when starting a business:
- You’ll need to open a bank account in your business’s name to keep your liability protection intact (if your partnership type offers liability protection).
- You’ll need a physical address where the business can receive mail and legal notices.
- Make sure you have a partnership agreement on hand. This document outlines how the partnership will be run and includes details such as how to deal with partners that leave, add new partners, change the business, or shut the business down.
What Benefits Does Nevada Give to a Limited Liability Partnership?
Limited liability partnerships have specific benefits. The first benefit of an LLP is that it does not have to pay income taxes. The partnership’s income passes through to its partners (who must report the income to the IRS and pay taxes on it).
You may not be personally liable for the LLP’s debts or the negligence and misconduct of your partners. You cannot use your personal assets to collect the partnership’s debts unless you personally guarantee a payment or commit misconduct.
What Disadvantages Does Nevada Give to a Limited Liability Partnership?
In Nevada, LLP partners are not protected from all business liabilities. Even if you commit misconduct, are negligent, or guarantee a debt personally, you may still be liable. To help mitigate this risk, you should seriously consider purchasing liability insurance if you form a limited liability partnership.
If you are concerned about liability, consider creating a limited liability company (LLC) or another type of corporation instead. (Nevada does not recognize an S corporation since it does not have income tax).
These business entities may offer additional protection. In Nevada, LLCs and corporations are subject to different rules and procedures. Choosing the right business structure can be helped by a business lawyer.
Can Anyone Form a Limited Liability Partnership?
Typically, LLPs are reserved for professionals, such as lawyers and accountants, in order that the partners may avoid liability for negligence or misconduct of other partners. Since an LLP is a general partnership with limited liability status, it runs like a general partnership and has the same flexibility of control with income, losses, and gains passing to the partners according to the partnership agreement or interests of the partners.
What Type of Liability Protection Does A Limited Liability Partnership Offer?
A partner in an LLP is only liable for the negligence or misconduct of other partners. A partner, however, is responsible for all other debts and obligations of the partnership that are not the result of negligence or misconduct.
Limited Liability Company vs. Limited Liability Partnership
A limited liability company (LLC) and an LLP are essentially the same things. The primary difference being an LLC has the same liability shield as a corporation, and thus members of an LLC may not be personally liable for the debts and obligations of the company.
Should I Hire a Business Lawyer?
Form filling is simple, but structuring a limited liability partnership involves much more. As an example, you should create a legally binding partnership agreement, evaluate liability insurance policies, and may have ongoing reporting responsibilities. A Nevada corporate lawyer can help you follow the correct procedures and protect your financial interests.
