If you are looking to start a professional business with another individual (oftentimes a close friend, colleague, etc.) in California, one of the first issues that needs to be addressed is whether it makes sense to create a limited liability partnership (an “LLP”) or go with another structure like a professional corporation. If you decide to form an LLP, it can provide your partnership with an opportunity to build and maintain a strong working partnership while creating an environment for the business to grow and thrive.
Overview
An LLP is akin to a limited partnership, but especially tailored for certain professionals. Under California law, an LLP can only be formed by and among the following licensed professionals:
- Attorneys
- Accountants
- Architects
- Surveyors
- Engineers
In addition, like any form of partnership, an LLP needs to have at least two owners operating as partners. This is important because if you, or your business partner, decide to step away from the business, it may require altering the legal structure of the business. Also, the LLP agreement must be in writing (i.e. handshake deals will not prevail in court).
In order to form an LLP in California, you need to comply with California Corporation Code § 16952 et seq. In contrast with a general partnership, an LLP needs to be organized in a formal manner, which means you need to pay the necessary filing fees and officially register with the California Secretary of State.
In addition to registering, an LLP is required to provide proof of security for future claims that might arise against the LLP. Pursuant to California Corporation Code § 16956, the types of proof accepted in the state include:
- Evidence of adequate insurance coverage;
- Sufficient deposits made to a recognized financial institution; and/or
- Proof of sufficient net worth as set out in California Corporation Code § 16956.
The major benefit of an LLP is that you and your business partner are effectively insulated from personal liability for the debts and/or liabilities of the partnership other than liabilities arising out of professional malpractice.
Have Questions? Contact an Experienced Business Lawyer in Los Angeles Today
There are many benefits associated with forming an LLP, with specific legal requirements that must be followed in order to take advantage of the liability protections afforded under the LLP structure. Hence, it is imperative to work with an experienced business lawyer in Los Angeleshttps://hakimlawgroup.com/our-attorneys/, to ensure compliance with specific state law.
For further information or to schedule an appointment with the highly reputable business attorney Afshin Hakim of Hakim Law Group please call 310.993.2203 or visit www.HakimLawGroup.com to learn more.
