Legal Definitions - L.L.P.

L.L.P. stands for Limited Liability Partnership.

A Limited Liability Partnership (LLP) is a type of business structure that provides its partners with a level of personal liability protection similar to that offered to shareholders in a corporation, while still allowing the business to operate as a partnership. In an LLP, partners are generally not personally responsible for the business's debts or for the professional negligence or misconduct of other partners. However, a partner remains personally liable for their own professional malpractice or for the malpractice of individuals they directly supervise.

Here are some examples to illustrate how an LLP works:

• Example 1: A Legal Practice
  Imagine "Summit Legal Partners, LLP," a law firm with three partners: Alice, Ben, and Carol. Alice is handling a complex corporate merger, and due to an oversight, she misses a critical filing deadline, leading to a significant financial loss for the client. The client sues the firm for malpractice. Because Summit Legal Partners is an LLP, Ben and Carol's personal assets (like their homes or personal savings) are generally protected from this lawsuit. Alice, however, would be personally liable for her own professional negligence, and the firm's assets might also be at risk.

• Example 2: An Architectural Firm
  Consider "Blueprint Architects, LLP," an architectural firm composed of several partners. The firm takes out a substantial loan to invest in new design software and expand its office space. Later, a major economic downturn causes many projects to be canceled, and the firm struggles to repay the loan. In this scenario, the bank cannot typically pursue the personal assets of the individual partners (such as their private investments or personal property) to recover the loan amount. The bank's recourse would generally be limited to the assets owned by Blueprint Architects, LLP itself.

• Example 3: An Accounting Firm
  "Global Accounts, LLP" is an accounting firm with multiple partners specializing in different areas. One partner, David, is responsible for auditing a client's financial statements. During the audit, David's team overlooks a significant accounting error that results in the client facing penalties from tax authorities. While David and the firm would be held accountable for this oversight, the other partners in Global Accounts, LLP, who were not involved in that specific audit or its supervision, would typically be shielded from personal liability for David's team's mistake.