As with a general partnership, a limited liability partnership requires an agreement so that each partner’s role, protections and expectations are clearly defined. The limited liability partnership (LLP) has been an ever-growing form of business organization in recent years. It protects a partnership in much the same way as a limited liability corporation protects the business. It is important, however, to check with your state before forming an LLP and signing an agreement, because not all states recognize this type of organization.
If your state does recognize an LLP, then an agreement of this type is essential if the goal of the partnership is to form individual protections. The limited liability partnership agreement sets forth terms designed to protect a general partner’s assets from liability claims against the partnership. Generally, this agreement protects against liability arising from the negligence, wrongful acts, or misconduct committed in the ordinary course of business by any other partner, employee, agent, or representative. The exception to this agreement would be if the partner created the liability himself or herself. In that instance, their personal assets would most likely be in jeopardy. As in any other partnership, the LLP agreement should define a joint liability for contracts and liability for normal business debts of the partnership. In some states, once an LLP agreement is utilized, liability insurance may be required. It is always important to check local laws before determining this is the appropriate agreement for your partnership, but to protect each partner from the liability of other partners, this type of agreement is a very wise choice.
This is a great article on limited liability partnerships! It seems like a limited liability partnership agreement can play a critical part in business law. There is often some kind of liability on each side. The difficult part is defining the liability and the terms, I think. That’s always a little rough.