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LLC existence. Limited liability company’s, or LLC’s, are legal entities created in accordance with state statute. They are often thought of as a sort of hybrid between a corporation and a partnership.

Existence of an LLC commences upon filing Articles of Organization with the Division of Corporations (or, like corporations, up to five days earlier or such later date as indicated in the Articles.) In Florida the initial filing fee to establish an LLC is $125. Existence may be perpetual.

LLP existence. In contrast, LLP’s are partnerships. A partnership exists by virtue of a partnership agreement, regardless of whether anyone else is aware of its existence. A Florida partnership becomes an LLP by registering its existence with the state ($50 filing fee) and by paying a $25 annual fee along with an annual Statement of Qualification. Existence may not be perpetual, but rather is "at will" unless a date of termination is established by the partnership agreement.

LLLP existence. Another addition to the alphabet soup of legal entities is the LLLP, a limited liability limited partnership. Like corporations and LLC’s, a limited partnership is a creature of state statute. Filing organizational documents and annual reports with the state are required for the limited partnership to exist. Unlike LLP’s, LLLP’s are already registered with the state. Thus, in order to become an LLLP, a limited partnership need only file a Statement of Qualification along with a $25 annual fee.

History. LLC’s have been part of the legal landscape since the 1980’s, but they were unpopular in Florida until 1998 when the legislature decided to treat LLC’s as partnerships for state income tax purposes, thus excluding LLC’s from Florida’s 5.5% corporate income tax (unless the LLC elects to be taxed as a C corporation).

LLP’s and LLLP’s were not recognized in Florida until July 1, 1999. Florida was one of the first states to recognize LLP’s and LLLP’s.

Rights to withdraw. Similar to a partnership agreement, the LLC Operating Agreement or Membership Agreement (formerly referred to as the Regulations) governs the interrelationship of the members and the LLC.   Unless the LLC Operating Agreement or Articles of Organization provide otherwise, a member may not withdraw from from the LLC. A similar rule applies for limited partnerships.

In contrast, partners in a general partnership (such as an LLP) have a right to withdraw at any time and be paid for their partnership interests, even if such withdrawal violates the partnership agreement. If the withdrawal violates the partnership agreement, then payment may be delayed until the purpose of the partnership has been accomplished or the termination date of the partnership has been reached, whichever comes first.

Number of owners. LLC’s have "members", rather than stockholders or partners. Being analogous to corporations, LLC’s can exist with only a single member. In contrast, since LLP’s and LLLP’s are partnerships, they must have at least two partners to exist.

Taxation. A single member LLC which does not elect to be taxed as a corporations is taxed for federal income tax purposes as if it did not exist. (That is, the member is treated as owning the LLC’s assets, income, etc.) In contrast, a single member LLC does have separate existence for state law purposes. For example, rentals of real estate owned by a single member LLC and leased to its member are subject to sales tax.

LLP’s, LLLP’s and LLC’s with more than one member are taxed as partnerships for both federal and state income tax purposes unless they elect to be treated as corporations. 

A technique I often use in estate planning is to to establish an LLC with two members, each of which is a grantor trust.  Each of the grantor trusts is a "disregarded entity" for federal income tax purposes, but is recognized for federal estate tax purposes. Thus there will only be one member, which means the LLC will also not have a separate existence for federal income tax purposes. The result is that the grantor is treated as owning the LLC assets, income, etc., which eliminates the need for the LLC to file an income tax return.  

Asset protection. LLC’s, LLP’s and LLLP’s all provide significant levels of asset protection. LLC members and LLP and LLLP partners are generally not liable for entity level liabilities.

A distinction between LLC’s, on the one hand, and LLP’s and LLLP’s on the other hand, is that there is a state statute providing that asset protection for LLC members from LLC level debts is to be determined by reference to the principles regarding whether stockholders of corporations are protected from corporate level debts, while the LLP statutes simply provide that partners are not  liable for partnership debts (unless voluntarily assumed, of course).

(c) 2011, Steven M. Chamberlain.  Publication with attribution is permitted.