Starting a Business? Consider Structuring it as a Limited Liability Partnership
Your business’s structure shapes its taxation, legal vulnerability, and more. Do your due diligence when researching business structures, and you’ll find LLP (short for limited liability partnership) as the most popular variety.
Why Limited Liability Partnerships are Popular
LLPs provide a myriad of benefits in the context of law and taxation. Per the name, limited liability means legal liability for damages related to the businesses is limited to the actual business as opposed to the owner’s personal assets. This flexible business entity ultimately empowers owners to retain personal assets, ensuring a business partner’s or employee’s actions do not devastate their finances.
The liability of business owners of an LLP is capped at the amount of money invested into the business. Start an LLP with others in West Monroe, LA, and the financial risk of ensuing litigation will be diversified across those parties.
The General Partnership Roots of LLPs
An understanding of LLPs requires comprehension of general partnerships. General partnerships are classifications for entities designated as “for-profit” and formed between two or more individuals. In short, general partnership is a legal term referring to two or more individuals working together for financial gain.
General partnerships are less formal than other business structures, merely requiring a mutual interest along with an agreement. However, the Achilles heel of general partnerships is that partners share legal liability in the context of litigation.
Enter LLPs. Entrepreneurs commonly favor LLPs as they safeguard business owners’ personal assets against lawsuits from customers, other businesses, and additional parties. However, the structure of each unique LLP is idiosyncratic. You’ll need an accomplished business law attorney from Niswanger Law’s team to form a legally sound LLP.
Aside from helping entrepreneurs in West Monroe, LA launch LLPs, we also guide self-starters through the yearly reporting and other bureaucratic requirements.
LLPs are not Completely Infallible
Search the web for LLPs, and you’ll find the praise is heaped high for this unique business structure. LLPs have limited liability in that the business owners can potentially lose assets within the partnership, yet personal assets are protected. If lawsuits are filed after the LLP forms, the partnership itself is the initial target of the litigation.
We would be remiss to overlook the fact that there is the potential for LLP partners to face potential legal liability if they personally wronged another party. However, opposing counsel must prove such personal wrongdoing occurred for there to be solid legal footing.
LLP Nuances of Note
LLP requirements differ by state. For example, some states require partners in an LLP to be licensed members of approved professions before establishing such a business entity. However, LLPs across the land of the free are uniform in that the same burdensome tax obligations of other entities do not saddle them.
LLPs move profits/losses to partners based on their respective shares in the enterprise. The partners then pay their own unique tax obligations in relation to the business. However, such taxes are paid at each partner’s tax rate.
Contact Niswanger Law Today for Business Planning Guidance
If you are considering starting a business or already own one, you need an experienced business law attorney in your corner. Niswanger Law is here for aspiring and established business owners throughout West Monroe, LA and beyond. Reach out to us today to schedule a consultation to learn more about business planning, business structuring, tax law, and more.