In this video, I discuss limited liability partnership as covered on the CPA exam.
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A Limited Liability Partnership (LLP) shares many similarities with a general partnership, particularly in how profits and losses are managed. However, there are key differences in terms of personal liability:

Limited Personal Liability for Partners' Actions: In an LLP, unlike a general partnership, a partner is not personally liable for the debts or obligations of the partnership that arise from mistakes, carelessness, or wrongful acts committed by other partners or by the employees, agents, or representatives of the LLP. This is a significant distinction as it offers a degree of protection to each partner from the actions of others within the partnership.

Liability for Personal Actions and Supervised Individuals: Despite the limited liability for others' actions, partners in an LLP are still personally liable for their own negligent or wrongful acts. Additionally, they are responsible for the actions of individuals who are directly under their supervision or control. This means that if a partner or someone they directly oversee commits an error or a wrongful act, that partner can be held personally accountable.

Limited Liability for Debts and Contractual Obligations: In general, partners in an LLP are not personally liable for the partnership’s debts and contractual obligations. This is another aspect that differentiates an LLP from a general partnership, where partners can be personally liable for the partnership’s debts.

The formation process of a Limited Liability Partnership (LLP) involves specific steps that distinguish it from other types of business structures:

State Filing Requirement: To establish an LLP, the partnership must formally file a document with the state government. This document is variously known as a registration, statement of qualification, application for registration, or certificate of limited liability partnership. This filing is a crucial step that legally distinguishes an LLP from other types of partnerships and businesses.

Restrictions in Certain States: Some states in the U.S. have restrictions on the types of businesses that can form an LLP. Often, these restrictions apply to professional services such as accounting, law, or other "learned professions". This means that not all businesses can choose to form as an LLP in every state.

Details Required in the Certificate: The certificate or registration document for an LLP typically requires detailed information about the partnership. This includes the name of the LLP, the location of its registered office (which is often a legal requirement for receiving official communications), the number of partners involved, and a description of the business activities the partnership will undertake.

In summary, forming an LLP requires a formal state filing process, which includes providing specific details about the partnership. This process can vary slightly based on state laws, and in some states, LLPs are limited to certain professional fields. This structured formation process is essential for a partnership to be recognized as an LLP and benefit from its distinct legal and liability features.


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