LLLP: Limited Liability Limited Partnership (LLLP)
A limited liability limited partnership (LLLP) consists of one or more general partners that manage the business operations and limited partners that maintain a financial interest in the entity. This form of business structure is a hybrid of a limited partnership (LP), established by state statutes and authorized under the ULPA (2001)(Last Amended 2013).. However, in contrast to a typical LP, both general partners and limited partners are shielded from personal liability in the case of debt or legal action against the business with some exceptions.
In order to fully understand the LLLP, it is important to know the difference between general partners and limited partners in a LP. General partners manage the day-to-day operations of the business. In contrast, limited partners are involved in a more limited capacity, usually only as an investor or as a “silent” partner. While statute has modified the exposure of limited partners, a general partner in a LP is subject to unlimited liability for the partnership’s debts. The decision to form or elect to be a LLLP reduces the general partners exposure to that of a limited partner eliminating personal responsibility or limited liability for the liabilities of the business, including debt with some exceptions. This liability protection is an important distinguishing factor of a LLLPs.
While limited liability is a plus for a business to elect to be a LLLP, there are some other considerations. Notably, not all states recognize a LLLP. Approximately 28 states either authorize the formation of the LLLP or require LPs to request a special election. Real estate ventures and estate planning arrangements, such as family limited partnerships, are commonly established as LLLPs. Other states such as California prohibit the formation but require an LLLP to register with the California Secretary of State before they start doing business in California.
This article is for educational purposes only.