Let me explain: a Florida Limited Partnership (LPs) is like a general partnership; however it has two types of partners. A Florida Limited Partnership must have at least one general partner who manages the business and is personally liable for its debts and claims. A Florida Limited Partnership must also have a Limited Partner who contributes capital to the business yet is not involved whatsoever in the management. The Limited Partner is not personally liable for business debts and claims as long they never participate in management. Formerly, in the “old days”, attorneys formed limited partnerships with a corporate general partner so that no individual would expose themselves to personal liability as general partner. The general partner of an LLLP is protected by the above statute from liability for the acts of the limited partnership. Therefore, an individual general partner of a limited liability limited partnership exposes himself to no individual liability.
The advantage of using an LLLP with an individual general partner is that the partnership saves the cost and complexity of establishing and maintaining a separate legal entity (the corporate general partner) in order to avoid personal liability.
Any existing limited partnership may become a limited liability limited partnership and remove the burden of liability from the general partner. Those limited partnerships with corporate general partners can amend their agreements, dissolve the corporate general partner, and replace it with an individual limited partner.
There is no reason why any partnership concerned about liability of its general partners should not file a Statement of Qualification to become a limited liability partnership. To become a limited liability limited partnership (or a limited liability general partnership) the partnership needs only to file a “Statement of Qualification” with the State of Florida and pay a filing fee. Filing of the Statement of Qualification does not disturb any other aspect of the underlying entity or existing partnership agreement.
However, there are other reasons why a limited partnership might actually be the right structure for you and your partners. Succession planning and tax planning for family businesses is a good example. Protection of the limited partner is another.
Call your attorney to discuss – and if you don’t have a good asset protection attorney, call us.