Limited liability limited partnership

LLLP versus LP

In a traditional limited partnership, the general partners are jointly and severally liable for their debts and obligations. Limited partners are not liable for those debts and obligations beyond the number of their capital contributions.

An LLLP allows liability for debts and obligations of the limited partnership to be transferred from the general partners to an external insurer, something that is not possible with a traditional LLP. By having the limited partnership make an election under state law, the general partners are afforded limited liability for the debts and obligations of the limited partnership that arise during the period that the LLLP election is in place. The manner of the election varies in accordance with state law. For example, in Delaware LLLP elections take the form of a limited partnership electing to be a limited liability partnership (this is the format used in Delaware, while in Florida, Hawaii and Kentucky the election is made in the certificate of a limited partnership).

Not all states presently allow business entities to form as LLLPs. Most states that recognize LLLPs require that an entity’ identify itself as an LLLP in its name, but that requirement is not universal. LLLPs are most common in the real estate business, although other businesses can also use the form, for example, CNN. Questions remain about whether the limited liability provided to general partners by the LLLP election will be effective in states that do not have an LLLP statute.