A limited liability partnership (“LLP”) is a type of business arrangement which allows the individual partners to be free from the debts and liabilities of all of the other partners. Additionally, the individual partners are free from specific debts and liabilities of the partnership. In an action brought against the partnership as a whole, no single partner is personally liable. This is how this particular business structure differs from a general partnership, in which all partners are liable for the partnership’s debts and obligations.
A limited liability partnership is similar to a general partnership in that all partners can actively participate in the management of the business. And, losses and gains from the business are passed through to the partners according to their partnership agreement. In California, New York, Oregon, and Nevada, only individuals who are licensed to practice public accounting, law, or architecture, can structure their business as an LLP.
How a Limited Liability Partnership works can vary based on state laws, as was just mentioned. Generally speaking, there must be at least two owners forming the LLP. These people are known as partners. Each partner shares in the profits of the LLP, and has an active role in managing the company. However, unlike a general partnership, individual partners in an LLP have limited liability regarding the company. The partners are not personally liable for the misconduct of others involving the LLP, and only their investment in the company is at risk in the event that a legal issue arises.
What Are the Requirements for an LLP? What Paperwork Do I Need to Form an LLP in New Jersey?
Once again, the requirements for an LLP vary from state to state. For a valid New Jersey LLP, the business must satisfy several requirements set forth in the New Jersey Limited Liability Partnership Act.
The first requirement is that the partners of the company must vote to become an LLP. Second, any company seeking to be an LLP in New Jersey must file specific paperwork with the New Jersey Department of Treasury’s Division of Revenue and Enterprise Services.
Third, an LLP must also maintain either an office in New Jersey, or a registered agent who is capable of receiving service of process on behalf of the company. Such an agent can be anyone over the age of eighteen, or any corporation that is properly registered to do business in the state of New Jersey. Finally, an LLP must have a name that ends with “L.L.P.” or “Limited Liability Partnership.” An example of this would be The Dry Cleaner, L.L.P.
To further discuss the second requirement, a company is not allowed to operate as an LLP in New Jersey unless it files specific paperwork with the Division of Revenue and Enterprise Services of the Department of the Treasury of New Jersey. Business partners may file the paperwork online, via mail, or in person at the Division of Revenue and Enterprises Services’ Corporate Filing Unit’s office.
The paperwork that must be filed is the Public Records Filing for New Business Entity. In order to complete the Public Records Filing, you will need to provide:
- The LLP’s name;
- A short description of the kind of business in which the LLP plans to engage;
- An indication if the LLP is domestic, meaning that it has not registered in another state yet, or foreign, meaning that it has registered in another state already; and
- The street address for the LLP’s main office.
If the LLP’s main office is outside of New Jersey, then you will need to provide the name of your registered agent, as well as the street address for their office. One of the reasons behind having to list the main office address and name of the registered agent is for the service of legal documents on your company. For example, if your company is ever sued in the future, the registered agent will be the individual in charge of receiving service and notice of the lawsuit.
Additionally, you will need to note where the LLP was first registered if it is a foreign LLP. Finally, before you can submit the form, you will need to have at least one of the partners of the LLP sign it.
What Is the Difference between Limited Liability Company vs. Limited Liability Partnership in New Jersey?
A limited liability company, or “LLC,” is a form of business organization that combines the limited liability benefits of a corporation with the management and tax structures of a partnership. The term “limited liability” simply means that the members of an LLC generally cannot be held personally liable for the debts and actions of the business.
What this means is that the personal assets of the members of the LLC are generally protected from any creditor or legal claims made against the LLC. However, even limited liability does not shield owners from their own negligence. Meaning, LLC members who act negligently may still face liability for their actions.
LLPs generally have many of the same tax advantages as LLCs. However, an LLP cannot have corporations as their owners. And, LLPs must have a minimum of one managing partner who is to bear liability for the partnership’s actions.
What Benefits Does New Jersey Give to an LLP? What Disadvantages Does New Jersey Give to an LLP?
There are many benefits of limited liability partnerships in New Jersey specifically. The state offers a number of programs designed to help companies thrive. One such program is the New Jersey Business Action Center, which offers services such as mentoring assistance and referrals to financial programs. Another program is the Urban Enterprise Zone for companies located in specific areas of the state. The Urban Enterprise Zone offers a number of financial benefits, such as subsidized unemployment insurance costs for specific employees. Additionally, the program provides tax exemptions on items such as capital equipment.
One of the main drawbacks of limited liability partnerships is that if a company wishes to remain as an LLP, the company is required to file an annual report with the New Jersey Secretary of State. Additionally, the LLP must pay a filing fee of $50 to file the report. If they fail to do so, the LLP will face a revocation of their registration with the state. However, with the evolution of technology, New Jersey does allow for both online submissions of new business formations, as well as online filing for the annual report required to renew the initial filing. All of the links to filing online can be found at the homepage for the Division of Revenue and Enterprise Services.
Where Can I Find the Right Lawyer?
If you are considering forming an LLP, specifically in New Jersey, you should consult with skilled and knowledgeable New Jersey corporate attorneys. An experienced business formation attorney in the area will be most knowledgeable in terms of local laws and how they could affect you and your business.
As can be seen, setting up an LLP can be a complicated process. An experienced attorney can help you through the process and ensure all necessary paperwork is filed correctly with the State. Finally, an attorney can also represent you in court, should any legal issues arise during the formation process.
