Limited Liability Partnerships

Only attorneys, accountants, and architects may form limited liability partnerships in California (the only state that has this restriction).  (See California Corporations Code Sections 16951 et seq.)  Partners are relieved from liability for negligence and misconduct of other partners and employees of the partnership and from the partnership's contractual obligations. This relief from liability is perhaps more extended here in California than in any other state. Partners are not responsible personally for acts of those that they supervise. Otherwise, treated as a general partnership.

How Formed? Registration Form LLP-1 filed with the Secretary of State. Name must contain the words "Limited Liability Partnership" or "L.L.P.," LLP," "R.L.L.P.," or "RLLP" (the "R" as an abbreviation for "Registered") at the end. This name may not be rejected because it is similar to another LLP; an LLP need not file a fictitious business name statement. An existing general partnership may convert to an LLP in the same manner. The LLP must maintain insurance of $100,000 per each licensed professional (minimum of $500,000), or must escrow cash in that amount within 30 days of being served with a complaint. There are designated maximum limits on aggregate claims. The State Bar and the Board of Accountancy have additional rules for registration and licensure of LLPs.

Taxation: Taxed as any other partnership (subject to an election under the "check the box" regulations to be taxed as a corporation) for federal purposes; California imposes an $800 minimum franchise tax, however.