Starting a business in New Jersey requires more than simply opening your doors and declaring your company open for business. Rather, months or years of planning and corporate planning are often behind a successful company. In light of this, the attorneys of The Jayson Law Group LLC have produced a video series intended to familiarize potential business owners with the basics of starting and operating a company.
Past entries in this video series have already examined the steps you should take prior to forming a business and the four types of business entities. This part explores the potential benefits and drawbacks of selecting a limited liability partnership (LLP) as the form for your business entity in New Jersey.
However, be sure to keep in mind that this video is merely a starting point. It is not legal advice and it does not establish an attorney-client relationship. However those interested in forming a business in New Jersey are encouraged to discuss their goals and plans with an experienced attorney and accountant. Now, without further delay, let us discuss the benefits and drawbacks of the LLP.
What is a Limited Liability Partnership?
A limited liability partnership is a form of partnership that is often utilized by professionals like accountants, architects, and lawyers. In fact, in New York, California, and Nevada LLPs can only be formed by professionals for professional use. This type of business entity is somewhat unique. Unlike a standard partnership or sole proprietorship, a LLP protects all of the partners from some of the company’s liability. Those who wish to avail themselves of this type of a business entity must file with the state of New Jersey. Failure to file for the proper business entity can mean that your personal assets will not be protected from liability incurred through your business. Other advantages of a LLP include:
It is treated as a pass-through for taxation purposes meaning the partners are taxed but the entity is not. This eliminates the “double-taxation” concern brought by some entities.
The entity can hire and fire employees.
The partnership can sue and be sued but most personal liability is extinguished.
LLPs are governed by a partnership agreement.
However, like other forms of business entities, there are some negative aspects to utilizing an LLP. To begin, an LLP does not fully protect the assets of partners. General obligations, like a generalized business loan for instance, can still lead to an obligation by the partners. Therefore, partners of an LLP should consult with a lawyer and an accountant prior to taking out a business loan. Second, the LLP business entity is not available in all 50 states. What this means is that simply because your entity has been lawfully formed in New Jersey, it does not mean you will be able form a new entity of the same type in a new state should you decide to expand.
Put our business formation experience to work for you
Thank you for watching The Jayson Law Group LLC’s 5th video in our video series on The Legal Aspects of Starting a Small Business in New Jersey. The Jayson Law Group LLC has business attorneys serving Milburn, New Jersey and beyond. If you would like to discuss business formation with an experienced attorney, call The Jayson Law Group LLC at 908-768-3633 or contact us online.