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A limited liability partnership (LLP) is one way of operating a business that is available in Florida. Limited liability partnerships in Florida are created under Sections 620.9001–620.9003, Florida Statutes, which is part of the Revised Uniform Partnership Act of 1995 (RUPA).
In short, a limited liability partnership works like other general partnerships, except for the personal liability protection of its partners. They offer a way for business owners to run their businesses, while also protecting them from personal liability, thus seemingly avoiding the disadvantage of a general partner’s unlimited liability seen in businesses operating in other ways (e.g., general partnerships or limited partnerships).
However, there are also weaknesses to consider. In this article, we will provide a primer on limited liability partnerships in Florida, including certain benefits of forming an LLP, requirements for forming one, considerations to keep in mind, and weaknesses of the LLP business structure.
A limited liability partnership offers benefits for business owners, including personal liability protection and tax advantages. Perhaps most importantly, generally the partners in an LLP are not personally liable for partnership obligations (including protection from contract and tort claim liability like the shareholders of a corporation) by virtue of being a partner, as compared to general partnerships or limited partnerships where there may be liability. This liability limitation can make it easier for partners to be involved in the business’s management.
Regarding tax, an advantage of a limited liability partnership is that the LLP passes through its items of income, gain, loss, and credits to its partners without taxation at the partnership level. This is compared to a corporation (other than an S corporation) which typically is responsible to pay tax as a corporation.
Under Florida Statutes, a partnership (and limited partnership) can become a limited liability partnership by filing a statement of qualification with the Florida Department of State. A statement of qualification is required by statute to contain the following information:
“(a) The name of the partnership as identified in the records of the Department of State; (b) The street address of the partnership’s chief executive office and, if different, the street address of its principal office in this state, if there is one; (c) The name and street address of the partnership’s agent for service of process, who must be an individual resident of this state or other person authorized to do business in this state; (d) A statement that the partnership elects to be a limited liability partnership; and (e) A deferred effective date, if any.”
While a written limited liability partnership agreement in Florida is not required, it is recommended that the partnership agreement be in writing rather than oral or implied. Relations among partners and between partners and a partnership are generally governed by the partnership agreement when the partnership agreement differs from RUPA.
According to Florida Statutes, if a partnership is being converted to a limited liability partnership, the terms and conditions must be approved by the vote necessary to amend the partnership agreement. However, for a partnership agreement that expressly considers contribution obligations, the terms and conditions of becoming an LLP must be approved by the vote necessary to amend those provisions. See Section 620.9001(2), Florida Statutes (2022).
Also, there are limited liability partnership naming requirements under Florida Statutes. ‘The name of a LLP must end with “Registered Limited Liability Partnership,” “Limited Liability Partnership,” “R.L.L.P.,” “L.L.P.,” or “LLP.”’ Also, it must not be the same as another business name on file with the Florida Division of Corporations, except fictitious-name registrations or other exceptions provided by law (e.g., see Section 620.1108(4), Florida Statutes (2022)).
Despite the benefits of forming a LLP, there are also weaknesses to consider. One drawback is that in the same manner as a general partnership, the duration of the existence of a limited liability partnership may be limited because the LLP can dissolve if a partner dies or withdraws from the partnership. Another disadvantage is that a limited liability partnership has less flexibility in admitting new or transferring ownership interests compared to a corporate interest.
A limited liability partnership is one of the business structures available in Florida. They have advantages including limited liability for partners and tax benefits. However, it is important for business owners to also consider the potential drawbacks of a limited liability partnership, for example, the risk of dissolution if a partner withdraws or dies. It is advisable to consult a Florida attorney about whether a limited liability partnership is the right structure for their business and for assistance with relevant legal documentation. Click here to contact Guala Law Firm.
Peter J. Guala is a business and real estate attorney and mediator in Florida. Peter is the Managing Shareholder of Guala Law Firm, P.A., a Florida law firm with business & corporate, condominium & planned development, and real estate practices as well as effective mediation services. Learn more about Peter and the firm on Guala Law Firm’s website. You can also follow Guala Law Firm on LinkedIn.