A limited liability partnership (LLP) is a business structure that consists of two or more general partners, owners of the company. The general partners operate the company together and can act as its representative.
While the partners can operate the LLP however they like, they are not personally responsible for the LLP. Instead, their liability is limited to only the amount they have chosen to invest in the company. You need to register it as an LLP with the Kansas Secretary of State to form an LLP.
What Are the Rights of a General Partner?
As a general partner, you are entitled to an equal share of the partnership’s profits unless otherwise specified by your partnership agreement. You are also entitled to full disclosure by your partners of anything they do on behalf of the partnership, and you have the right to withhold your consent to any such dealings.
How Do You Make a Successful Partnership Agreement?
A partnership agreement is an agreement between the partners that describes the relationship that each partner has with the business and outlines the rights and obligations that each partner has to the partnership.
It may also include:
- The amount or portion of the partnership owned by each partner;
- Which partners have authority to make business decisions on behalf of the partnership;
- The method the partners will use to resolve business disputes among the partners;
- How the partnership can be dissolved or transferred;
- The process of adding new partners; and
- Any other policies or procedures that the partners have to make significant decisions or handle essential aspects of the partnership.
The more detailed the partnership agreement is, the more likely it will be prosperous. The partnership agreement should solve every foreseeable and possible problem that could arise and harm the business. This will also help to bolster the partnership itself.
Further, while partnership agreements may be created orally or impliedly (by the partners’ actions), it is best to write the partnership agreement. That way, the agreement may act as a reference to settle disagreements quickly or can be used as evidence to solve any future legal problems, should they arise.
Who Is Responsible for Acts of Negligence in an LLP?
While the partners in an LLP are not responsible for their co-partners’ acts of negligence or misconduct, they are personally responsible for their negligent acts. The partners are only protected from individual liability when the wrongful conduct was committed by the partnership itself (which exists as a separate legal entity from its constituent members) or by other partners.
Can an LLP Sue its Individual Partners?
A limited liability partnership may sue, in its capacity, individual partners. This could include actions for breaching the partnership agreement or causing harm to the partnership.
An individual partner may also sue the partnership to enforce the partnership agreement or enforce their right to relevant details about the partnership and their rights to an equal share of profits generated by the business.
Can One Partner in an LLP Sue Another Partner?
As to lawsuits between partners, there are no particular rules when the partner is suing another partner for behavior that had nothing to do with the partnership (for instance, if one partner hit the other with their car).
Nevertheless, if the partner acted with the authority of the partnership against another partner personally, the injured partner will likely sue the partnership.
What Are the Requirements for an LLP?
Every LLP in Kansas must meet detailed requirements. First, the company aiming to become an LLP must vote in favor of changing from a general partnership to an LLP. Once you have held the vote, you must come up with a name for the company that ends with “LLP,” LLP,” “Limited Liability Partnership,” “RLLP,” “RLLP,” and “Registered Limited Liability Partnership.”
The LLP must also have a resident agent who is either a person or a business entity approved by the Kansas Secretary of State to conduct business in Kansas. The resident agent must be willing to accept official documents and service of process on behalf of the LLP. A domestic LLP, which is an LLP that is created in Kansas, may serve as its own registered agent.
Nevertheless, a foreign LLP, which is an LLP made elsewhere, is prohibited from serving as its own agent. In addition to having the vote, coming up with the new name, and settling on a resident agent, you will also need to file paperwork with the Kansas Secretary of State.
What Paperwork Do I Need to Form an LLP?
The paperwork you will need to file can be filed either online or via the mail. Domestic LLPs must file a Limited Liability Partnership Statement of Qualification. To finish the form, you must include the LLP’s name and mailing address, the resident agent’s name and address, and the LLP’s tax closing month, the last month of a company’s financial calendar year. You can also include a delayed effective date for the Statement of Qualification if you do not want it to be effective upon filing. Two of the LLP’s partners must sign the form.
A foreign LLP must file a Certificate of Good Standing or Existence and a Foreign Limited Liability Partnership Statement of Qualification. The form requires you to provide the LLP’s name, the tax closing month of the LLP, the LLP’s mailing address, and the country or state where the LLP was first formed.
You will also need to indicate whether the LLP intends to do business in Kansas upon qualification or on a different date and when you wish the Statement of Qualification to become effective. You will also need to get two of the LLP’s partners to sign it.
What Benefits Does Kansas Give to an LLP?
The profits for an LLP are usually taxed through each partner’s income tax. Kansas has decided not to tax any income that a partner receives in their share of an LLP’s net profits, meaning that a partner will only have to pay a federal income tax on this money. Nevertheless, a partner will still be taxed for any salary or wage that they obtain as an employee of the LLP.
What Disadvantages Does Kansas Give to an LLP?
Kansas requires every LLP to file an annual report on the 15th day of the fourth month following the LLP’s tax period closing. If an LLP fails to file the report, it will forfeit its Statement of Qualification and cease to exist.
Should I Hire a Business Lawyer?
Forming an LLP has a lot of requirements and can be a disjointed experience. Talking with a Kansas corporate lawyer will be extremely useful during this process. Another reason you should contact a lawyer is to help you choose which type of partnership is best for your business.
Some formations of partnerships are better suited for specific businesses than others. The type you select may determine the amount of taxes you and your partners will be responsible for and the liability risks associated with the partnership selected.
Finally, a lawyer can also help with any conflicts regarding the partnership and guide the partnership through the dissolution process. If necessary, they can also represent you individually or the entire partnership (depending on the type of partnership and basis of the case) in court.
