What is the difference between lp llp and lllp

In the past, some business owners created an LLC or corporation to serve as the general partner to eliminate risk for general partners. A limited liability limited partnership LLLP eliminates the need for this strategy.

Partnerships, LPs, and LLLPs are very flexible, and there are many considerations in setting them up and drafting the partnership agreement and other documents involved.

Some states have a statute that specifically addresses and authorizes forming an LLLP, while other states ask LPs to file for limited liability protection, with the filing required to be renewed annually or the protection lapses.

The following state laws include LLLP enabling statutes:. LLLPs are not recognized in all states, thus being another reason you need to research local laws to see if you can or cannot form one. In the states where it is legal to form an LLLP, there are generally two ways to create one.

A statute will give direct authorization for the LLLP to be formed or the limited partner will file for limited liability protection according to the state statute that recognizes LLLPs.

An LLP, although it may sound odd, does not, in fact, have limited partners. An LLLP, however, does. An excellent way to think of the difference and to help you understand how the two are different from one another is to view an LLP as a general partnership that takes on various types of limited liability protections. An LLLP, on the other hand, does take on limited liability protection, but it's a limited partnership.

Also, the primary difference lies in the fact that the two types were different entities before they elected for their general partners to have limited liability.

It used to be that companies would help general partners from being exposed by setting up limited liability companies and naming them as their general partners and then they would elect themselves to manage these companies.

Not only could they benefit from the limited partnership, but they would deter themselves from being attached to any company debts. For example, investors may choose to form an LLLP when constructing a hotel chain or a number of commercial buildings. An LLLP gives them certain advantages and protections that are not provided by the other entities, such as being let off the hook for personal liability. In other words, they may lose their investment money, but they cannot be held personally liable for debts owed or unpaid taxes that belong to the LLLP.

Unlike some of the other entities, this benefit can be exercised by both the limited partners to the LLLP and the general partners. Some other examples include publishing firms, car dealerships, asset management companies, and as an outlier in the media industry, even CNN. As discussed above, LPs and LLLPs are similar in that they both have to have at least one general partner and some number of limited partners. In each of these types of entities, the limited partners are only liable for their investments and they are not liable for any of the debts or obligations of the partnership itself.

In contrast, under an LP formation, the general partner will be equally responsible for debts incurred by the partnership as well as can be held personally liable. On the other hand, under an LLLP formation, the general partner can no longer be held personally responsible for debts incurred by the partnership. In contrast, an LLLP is a limited partnership where both sets of partners receive limited liability protection.

Again, since LLLPs are the newest type of business entity, it has not been adopted yet by every state. Determining what type of business entity that your organization should be structured as plays an essential role in the success of your business. Therefore, you should strongly consider contacting a local business attorney who can help you to evaluate the options. Additionally, an experienced business attorney can also review the necessary paperwork before filing it with your state and can walk you through the filing process as well.

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