How to Form an LLP in Kentucky

When starting a company, owners have multiple choices for structuring their company, such as creating a limited liability company (LLC), a corporation, or a limited liability partnership (LLP).

What Makes an LLP Unique?

An LLP offers security to all owners or general partners by limiting their liability while still giving them the ability to share control of the company equally. A partner in an LLP is solely accountable for the amount of money they put into the business. Even though they are not liable for the LLP, a partner still has the chance to engage in the company’s management substantially. In Kentucky, you will have to go through the Kentucky Secretary of State to develop your LLP.

What is Required to Open an LLP?

Kentucky’s laws have placed several requirements to create an LLP. You must acquire a registered agent who either resides in Kentucky or has the approval to do business in Kentucky. The registered agent also has to agree to receive official documents, be served on behalf of the company, and be located at a registered office associated with the LLP in Kentucky.

An LLP’s name must end with either: “Registered Limited Liability Partnership,” “Limited Liability Partnership,” “R.L.L.P.,” “L.L.P,” “RLLP,” or “LLP .”Similar to other partnership types, an LLP needs at least two partners. If you want to create a domestic LLP, you must file a Statement of Authority for the partnership prior to starting an LLP. A domestic LLP is one that has been created in Kentucky. A foreign LLP is an LLP that was made somewhere else. Your business cannot become an LLP in Kentucky unless it files paperwork with the Kentucky Secretary of State.

What is the LLP Paperwork?

The paperwork you file depends on whether you want to register a domestic LLP or a foreign LLP. You can file the paperwork for both types of LLPs online through the Kentucky One Stop Business Portal website. You can also mail in the form. Printed forms can be found on the Kentucky Secretary of State’s website.

Domestic LLPs must fill out a Statement of Qualification. Foreign LLPs must finish a Statement of Foreign Qualification. The forms require many of the identical details, including:

• The name of the original partnership seeking to be registered as an LLP
• The name the LLP plans to use in Kentucky
• The mailing address of the LLP, which may be either a street address or a post office box
• The name of the registered agent
• The street address of the LLP’s registered office where the agent can be found

If you are creating a domestic LLP, you must list when the partnership filed its Statement of Authority on the Statement of Qualification. A foreign LLP must list the state or country where it was originally formed on a Statement of Foreign Qualification. Both forms need the signature of the registered agent and two LLP partners.

What Are the Benefits of a Kentucky LLP?

Kentucky is a business-friendly state based on the number of programs and tax incentives designed to help companies grow in the state. For instance, the Kentucky Enterprise Initiative Act presents a reimbursement of sales and use taxes for construction materials and research and development equipment to companies not involved in retail.

Another program devised to assist Kentucky businesses to flourish is the Kentucky Economic Development Finance Authority Direct Loan Program. This program delivers loans at below-market rates to non-retail businesses to support the costs of new fixed assets.

What Are the Disadvantages of a Kentucky LLP?

Each LLP registered in Kentucky must file a yearly report by June 30. Suppose the report is not filed by the deadline. In that case, a domestic LLP can be administratively dissolved. A foreign LLP can have its power to operate a business in Kentucky revoked.

What Are the Kinds of Partnerships? What Are Liability & Tax Considerations?

Partnership income is usually taxed on the partners’ personal returns. Some Kentucky partnerships may be instructed to file an annual report. The Internal Revenue Service delivers a guide to the Federal taxation provisions for partnerships.

Personal liability is a necessary issue to think about when starting a company. Personal liability is the owners’ personal responsibility for the business’s debts and deficits. Some partnership arrangements present liability shelter for their owners, permitting them to harbor their personal assets from the company. For instance, if your partnership is defeated in a suit and has to disburse a colossal payment, personal liability will aid in safeguarding your home, money, and savings from the settlement.

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

The kinds of partnerships available in Kentucky are analogized beneath, with details emphasizing the distinctions in liability and tax respects.

General Partnership (GP)

The general partnership is the simplest partnership. It provides no liability security and isn’t restricted by many regulations, suggesting utmost freedom to do business as you desire.
General partnerships provide no liability protection. Each partner is personally accountable for the organization’s debts.

A partner’s personal assets, such as their house or money, can be taken to recompense company obligations.

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

General partnerships are excused from many regulations concerning the company’s name, operation, and uphold. General partnerships usually don’t require much-complicated paperwork.

Limited Partnership (LP)

Limited partnerships are comparable to general partnerships, but limited partnerships offer two classes of partners: limited and general partners.

Limited partners are not authorized to handle the day-to-day procedures of the company but get personal liability protection.

Limited partners are solely responsible for the capital they’ve sponsored into the business.

General partners are entirely responsible for the company deficits, but they manage the day-to-day procedures.

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

Limited partnerships are especially prevalent with partners that desire to entice outside investors that normally function as limited partners. These outside investors are typically shielded from the business’s obligations and debts.

More On Limited Liability Partnerships

Partners can’t be kept accountable for different partners’ errors, mistakes, or outright cons in limited liability partnerships. These partnerships are extremely prevalent among specialists who anticipate bearing many liability risks resulting from lawsuits, such as physicians and attorneys. For instance, if four physicians form an LLP and one is sued for malpractice and loses an expensive case, the additional physicians won’t be personally responsible for paying off that debt.

LLPs are comparable to general partnerships, but each partner is exclusively responsible for their investment.

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

What is a Limited Liability Limited Partnership in Kentucky?

Limited liability limited partnerships blend the advantages of an LP and LLP. An LLLP has general and limited partners, but they are all shielded from each other’s obligations, mistakes, and legal responsibilities. Like an LLP, the LLLP is prevalent among high-risk occupations seeking outside investment.

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

LLLPs still have two types of partners. They are called general and limited partners. The general partners handle the day to procedures, and limited partners are more like quiet investors.

LLLPs are taxed as a pass-through entity.

Should I Hire a Lawyer?

Creating an LLP in Kentucky is not an easy task. Thus, you should consult with a Kentucky corporate lawyer before setting up an LLP.