Understand and apply the various nuances of an LLP before there are disputes and its too late.
Forming a Colorado limited partnership means operating a business with more than one owner. This 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 limits partnership liability to some extent. When forming LLP business entities, all partners are considered general partners.
What is your exposure in an LLP?
When your 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.
In Colorado, 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 Required: In 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.
Limited Liability protection for all partners. One of the main entities in Colorado is that all partners benefit from some level of protection.
- State law drives which type of business entities must form an LLP
No change in securities law: In some states security laws may not apply since all members of the LLC are looked at legally as general partners.
Limited Partnership Disadvantages
Foreign State Recognition: Not all states recognize foreign limited liability partnership (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.
Limited Partnership LP
Limited partners in an LP should not actively participate in the 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.
Preference for LLPs?
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.
For help forming an LP or LLP and operating your business, call our Colorado limited partnership law attorneys at 1-866-601-5518.