Can I Form LLC Partnerships?
Can I form LLC partnerships? Well not really, an LLC Partnerships or Partnership LLCs are misnomers. Technically an LLC (Limited Liability Company) is a company, not a partnership. While there are some similarities between a partnership and an LLC, it is important to recognize that LLCs and partnerships are two different types of business entities.
If you are asking can I form LLC partnerships and you wish to have the liability protection that an LLC offers, you can do that. However, you will not call it a Partnership LLC or an LLC Partnership. You will simply call it an LLC.
When you form your LLC, your current partners will become LLC partners except you will call them LLC members instead of LLC partners. So you technically when you ask can I form LLC partnerships, you can’t do it but you can accomplish what you are asking in a different way.
The LLC requires more documentation than a partnership. First you must file Articles of Organization with your state. The Articles of Organization are a simple two or three page document that basically gives the state information on how to give you notice if you are sued.
Next your LLC needs an Operating Agreement. The Operating Agreement defines how you run the LLC, and how the world will deal with you. You get to dictate all of these issues in the terms of your Operating Agreement. You can set up both personal and company liability protection in this document. When you do you basically dictate the terms of the lawsuit. Why not skew the odds in your favor?
LLCs also require more maintenance than a partnership. You must hold annual company meetings and keep minutes. All business resolutions you make need to be documented. As you can see, they will be more time consuming to operate, but the extra liability protection makes it worth it.
LLCs are picked to be the business entity of choice because of their asset protection. They give you much better asset protection than a partnership. Plus LLCs give you accounting options a partnership doesn’t even approach. For instance, you can elect to have your LLC taxed as a partnership, or a corporation. You the owner of the LLC can choose how to be taxed.
There are reasons to forming a partnership, but your first thought when you think business entity should be “LLC.” Just take time to study it out. It is important to understand all the disadvantages, as well as the advantages, when you consider the legal structure for your business.
