Understand and apply the various nuances of a Colorado limited liability partnership before there are disputes and it’s too late.

Forming a limited liability partnership in Colorado means operating a business with more than one owner. Forming a Limited Liability Partnership in Colorado LLPThis type of business partnership offers owners some level of limited personal liability for business debts.

Partnership laws in various states may grant businesses the possibility of leveraging the strength of professionals and therefore minimize the cost of operation.

  • The mistake that many owners make is to expose themselves to unlimited risk and in several circumstances, personal liability.
  • Having a limited liability partnership allows you to protect your personal assets and exposure to personal liability.
  • You can still get the maximum benefit of being a partner in the business.

A limited liability partnership (LLP) adds to the other business entities. The difference is that although looked at as a general partnership, it does limit partnership liability to some extent.  When forming LLP business entities, all partners are considered general partners.

What is your exposure in an LLP?

When you form a limited liability partnership in Colorado, each general partner is exposed to the percentage of property or money that he or she has contributed to the business partnership.

Under Colorado partnership law, and applicable to each individual state, limited liability to each partner varies. Have a Colorado partnership law lawyer apply the requisite state liability to your specific situation. In many situations, owners of a limited liability partnership are generally shielded from the negligence of other business partners.

  • Under Colorado Limited Partnership Act, the business must have two or more owners to start a limited liability partnership.
  • Because an LLP is a partnership, it must have two or more owners.

General Partner RequiredIn a limited partnership, one or more partners are considered general partners. These individuals make the day-to-day decisions and also assume personal liability for business debts. Learn more about the limited liability company advantages and disadvantages.

Partnership for Colorado Entities? Advantages of limited liability partnership companies

One of the main limited liability partnership advantages is that each partner gets some level of exposure and protection. This type of partnership for Colorado companies is attractive because it encourages people to incorporate businesses together instead of worrying about the liability of others.

Limited liability for partners

With this business entity partners enjoy the benefits of limited liability and flexible management roles.  An LLP in  Colorado does not expose business partners to unlimited legal liability. The exposure will be the amount or percentage of the contributed amount to the LLP formation. However, an opposing business lawyer can try to pierce the protective shield if the lawsuit is found to be from an intentional act of the partner involved. See information about LLC operating agreements.

Partners have flexible roles

Forming a limited liability partnership in Colorado provides for extremely flexible management roles for each of the partners. The specific roles must be expressly stated and in the partnership agreement.  LLP partners can manage the company and can also choose how much management responsibility they want. However, the specifics must be stated in the partnership agreements.

Pass-Through Taxation

Colorado limited liability partnerships allow for pass-through taxation. The company avoids double taxation. Each business partner will only pay their personal taxes. The LLP is not taxed as a legal business entity. Speak to your accountant about the specifics


Foreign State Recognition: Not all states recognize foreign limited liability partnerships (often called foreign LLPs). This would mean that another state could end up treating foreign owners as general partners.

Some personal responsibility: When you form a limited partnership in Colorado each general partner will be responsible personally under the Colorado Limited Partnership Act. However, limited partners assume a different role. See tips for compliance.

Limited Partnership LP

Limited partners in an LP should not actively participate in business decisions or daily activity. They usually serve in the role of an investor or “silent partner”.

  • A showing of control over the business can make the limited partner personally liable for business debts.
  • When a third party seeks to enforce a business debt in Colorado Courts, the limited partner, if complying with the laws, will escape personal liability.

Limited tax liability: In CO limited liability partnerships, each partner will generally report and pay taxes on their share of the business profits. When there are several owners involved in your business, you always want to get the help of an experienced accounting firm that can educate you about the various nuances.

Personal Liability: If you are seeking to form a limited liability partnership in Colorado, you should first learn the rules and regulations. Otherwise, you may find yourself involved in business disputes and even personal liability. Not following statutory guidelines can leave your personal assets exposed to creditors and business debts. Once the ‘veil’ is pierced, courts have no problem imputing liability. See LLC vs Corporation – What Does LLC Stand for in Business?

Preference for Limited Liability Partnerships?

Many professional corporations prefer, if not have to form professional limited liability partnerships. Lawyers, accountants, and other state-regulated professionals do not have a choice in the matter.

Professional members frequently prefer forming a limited liability partnership in Colorado over a general partnership because they fear personal liability for another partner’s negligence.  A Colorado LLP will typically protect each business partner from business debts against the LLC that arises from malpractice lawsuits against another partner. Be mindful to have a Colorado partnership lawyer assess your specific set of facts to determine liability.

Forming a Limited Partnership in Colorado Means Following Statutory Guidelines

Whether you look to the Colorado Secretary of State or governing state statutes, you must understand that failure to follow the guidelines for your type of business can leave you exposed to personal liability. Sometimes this is called piercing the corporate veil. Learn also about the advantages of a partnership.

  • There are different rules for the various types of business entities.

Speak to an Attorney & Get a Free Initial Consultation

For help forming an LP or LLP and operating your business, call our Colorado limited partnership law attorneys at 1-866-601-5518.

3 comments on “Forming a Colorado Limited Liability Partnership

Comments are closed.