In a limited liability partnership, the partners enjoy some protection against personal liability. Each partner must be a person licensed under California laws to engage in the practice of public accountancy, law or architecture. The LLP is not a separate entity for income tax purposes; profits and losses are passed through to the partners and reported on each individual’s tax return.
A registered limited liability partnership must either a) maintain a malpractice liability insurance policy against claims of at least $100,000 multiplied by the number of licensed practitioners in the LLP, and not less than $500,000; or alternately, b) satisfy this requirement by confirming in writing that as of the most recently completed fiscal year, the LLP had a net worth of at least $10 million for an LLP providing accountancy services, $15 million for an LLP providing legal services, or $10 million for an LLP providing architectural services.
Like a general partnership, all partners have equal rights in the management of an LLP unless otherwise agreed. Partnerships are quite flexible; a great variety of control and management structures are available by agreement.
Each partner is responsible for liabilities imposed by law arising out of his or her own acts and omissions. In addition, each partner is responsible for debts and liabilities as defined in the LLP agreement.
Firms must complete theRegistered Limited Liability Partnership Registration (Secretary of State Form LLP-1) and submit it to the Secretary of State along with a filing fee. In addition, if the LLP chooses to satisfy the malpractice liability requirement by confirming the minimum net worth, the LLP must also complete and file a Limited Liability Partnership Alternative Security Provision transmittal form (Secretary of State Form LLP-3) with the Secretary of State. Upon receipt, the Secretary of State’s Office will review the registration form for statutory compliance. Once the document is filed, the Secretary of State will return a file-stamped copy of the LLP-1, plus a Certificate of Registration to the limited liability partnership.
Change or Dissolution
To register a change in the LLP, one or more authorized partners must complete and submit a Limited Liability Partnership Amendment to Registration (Secretary of State Form LLP-2) along with a filing fee to the Secretary of State. To register cancellation or dissolution of the LLP, one or more authorized partners must complete a Notice of Change of Status (Secretary of State Form LLP-4) and submit it with a filing fee.
NOTE: On September 29, 2006, the Governor of California signed Assembly Bill 2341, eliminating the need for a tax clearance certificate. This legislation streamlined the process for dissolving, or canceling the existence of business entities. Before this law was enacted, certain business entities, i.e., foreign corporations had to meet requirements of the Franchise Tax Board, before the Secretary of State (SOS) would grant the business’s request to terminate. Passage of AB 2341 remedies this situation. For more information, refer to Eliminating the Need for a Tax Clearance Certificate later in this section.
For additional information regarding registration of limited liability partnerships, contact:
Secretary of State
Document Filing Support Unit P.O. Box 944225 Sacramento, CA 94244-2250
Tel: (916) 657-5448
Forms and References