A Limited Liability Limited Partnership (LLLP) is a unique hybrid, which is a mixture of a Limited Partnership (LP) and a Limited Liability Partnership (LLP). It protects the general partner in certain cases but grants limited partners similar protection to those of an LLP.
In LLLP, it has two kinds of partners namely the general partners who manage the business and limited partners who contribute to capital. This is in contrast to a standard LP, in which only the general partner is subject to personal liability, but with an LLLP, the personal assets of the general partner are also not subject to business debts, albeit in a more limited sense than of LLP partners.
Key Features of an Limited Liability Limited Partnership (LLLP)
• Limited liability of general partners: The chief advantage is that a general partner is normally shielded against personal liability, unless due to negligence or misconduct.
• Limited liability of limited partners: They can never be liable more than the value of their investment and cannot be involved in the management.
• Management and control: The day to day running of the business is controlled by the general partner, the limited partners are the ones who provide capital and remain out of day to day running.
• Taxation: The LLLP is pass-through taxed, just as an LP, and thus the partnership itself does not pay any tax.
• State availability: Only some American states permit LLLP; the rest permit either only LPs or LLPs.
Pros of an Limited Liability Limited Partnership (LLLP)
• Excellent cover of general partners against personal liability.
• Appealing to the investors seeking to contribute capital without management responsibility or personal risk.
The company has a flexible structure combining LP and LLP characteristics to cover a wide liability.
Cons of an Limited Liability Limited Partnership (LLLP)
• Applicable to only a few states, thereby lessening applicability.
• It may make formation complicated and expensive with more filings and state regulations.
Limited partners should not be involved in management and create the risk of losing liability protection.
Example of an (LLLP)
Suppose it is a Californian real-estate investment company with multiple investors. The company may establish LLLP whereby a single individual is the general partner who has total control over the business whereas the investors become limited partners who inject capital but not held responsible in case of failure.
Conclusion
The Limited Liability Limited Partnership (LLLP) is an attractive combination of liability protection to the general and limited partners, and flexibility in management. It is particularly appropriate in companies where protection of liability and involvement of investors matter very much. A lawyer or business advisor should be consulted prior to the creation of an LLLP to ensure that requirements of the state law are met and that the structure fits your business needs. For more insights about and search Right Tax Advisor along with other laws, visit our website Tax Laws in the USA.
