Limited Liability Partnership (LLP) in United States

Definition on Plain-English Law

A Limited Liability Partnership is a kind of partnership that protects one of the partner from personal liability coming from some third party acts, including negligent issues by other partners or by employees not under his or her direct control. It is recognized and harmonized (throgh the Uniform Partnership Act in a majority of the U.S. states.

Voting Requirement to Become an LLP in the Uniform Partnership Act (UPA)

The Uniform Partnership Act (1994) included a new Section 1001(b) which provides that the decision to become an Limited Liability Partnership is a major partnership event equivalent to an amendment of the partnership agreement. Therefore, the required vote equals the vote required to amend the partnership agreement. When the agreement is silent on these matters, the required vote would be unanimous. Where the agreement includes several amendment votes depending on the nature of the amendment, the required vote is that which considers contribution obligations since those obligations are the most affected by the amendments. Most states currently consider the required vote to become a limited liability partnership to be an ordinary partnership decision requiring only a majority consent.

In becoming an Limited Liability Partnership, each partner should consider a personal liability calculus. Where partnership assets are insufficient to indemnify a partner for an Limited Liability Partnership obligation, each partner forfeits a right to receive contributions from other partners in exchange for being relieved of the obligation to contribute to the personal liability of other partners. This calculus will be different for each partner and will vary, for example, depending on the size and business of the partnership, the number of partners, the amount of insurance, and the relative risk of each partner’s business practice compared to fellow partners. To adequately consider these varying interests, the Act adopts the vote required to amend the partnership agreement in special and general cases.