A Limited Liability Partnership (LLP) can be described as that particular form of partnership whereby some or all of the members hold limited liability for their involvement in the partnership. The extent of liability completely depends on the jurisdiction. According to rules and regularities of this form of partnership, any partner cannot be held responsible if the other misbehaves or displays incidents of negligence. This also forms an important difference from the rules and responsibilities laid down for a limited partnership. Also, some of the partners in Limited Liability Partnerships or LLPs have some kind of limited liability (in the form of obligations or responsibilities), which is more or less similar to the shareholders of a corporation. However, the tax liabilities involved in a Limited Liability Partnership are quite different from that of a corporation.
Though all states provide for the formation of a Limited Liability Partnership, there are some subtle variations in the law from state to state. But the fact is that the fundamental concept of an LLP is broadly the same throughout the United States.
There is a lot in common between a Limited Liability Partnership (LLP) and any other regular partnership - except an LLP offers reduced personal liability for business debts and obligations.
Chapter 281 of the Acts of 1995 that came into force from the beginning of the calendar year 1996 has the enabling provision to Limited Liability Partnerships to register with the Corporations Division. The objective, as the name indicates, is to limit the personal liability of the partners of the business for debts, obligations and liabilities of the company. The law however makes it amply clear that a partner cannot escape or limit the liability for acts of negligence, deliberate errors or acts of omission.
The LLP that is legally termed as a ‘registered limited liability partnership’ should register with the Corporation Division's Specialized Section as per 950 CMR 111 et seq. The regulations classify ‘registered limited liability partnerships’ into three different categories:
- Registered Limited Liability Partnerships
- Registered Professional Limited Liability Partnerships
- Registered Foreign Limited Liability Partnerships