The California Limited Liability Partnership (“LLP”) is governed by California Corporations Code Section 16101 and California Corporations Code §§ 16951-16962.

California Corporation Code Section 16951 provides: “. . . the only types of limited liability partnerships that shall be recognized are a registered limited liability partnership and a foreign limited liability partnership, as defined in Section 16101. No registered limited liability partnership or foreign limited liability partnership may render professional limited liability partnership services in this state except through licensed persons.” Section 16101 defines the “’Professional limited liability partnership services’” as “the practice of architecture, the practice of public accountancy, or the practice of law.” In addition, land surveyors and engineers may also form LLPs, pursuant to SB284, approved by Governor Brown on August 10, 2015.The LLP is similar to the general partnership because it allows each partner an equal role in the day-to-day management of the enterprise, while at the same time limiting the personal liability of each individual partner. The key features of the LLP are:

• It is a flexible form of business.
• It is designed primarily for architects, accountants, lawyers, land surveyors, and engineers.
• The structure of the entity, as well as the distribution of profits and losses, is decided by the partners through a written partnership agreement.
• The income, deductions, credits, and shares of property, payroll, and sales of the partnership flow to each partner’s California Schedule K-1.
• Each partner is responsible for paying taxes on their distributive share.
• Each partner may actively participate in management affairs.
• Each partner is afforded limited liability protection.
• It remains alive based upon the partners’ agreement on a termination date.
• The LLP pays no income tax but is subject to an minimum franchise tax of $800.

While the partners of a California LLP enjoy limited liability for the tortious acts of the remaining partners, they are not shielded from their own acts. For instance, if a group of lawyers or accountants form an LLP and one of the partners commits some act constituting malpractice and one of the LLP’s clients suffers harm, the partner who committed the malpractice will be held responsible for that act. The remaining members of the LLP cannot be held directly responsible for the malpractice.If you are contemplating forming a group of professionals to practice your profession, you need to contact a “Rising Star” in the legal community Michael Leonard, Esq. of San Diego Corporate Law. To schedule a consultation with Mr. Leonard to discuss the type of type of entity best suited for your needs, or to discuss or any business-related matter, you can contact him by visiting San Diego Corporate Law or by telephone at (858) 483-9200.