Limited Liability Limited Partnership (LLLP)
An LLLP is a new modification of the limited partnership. Similar to a limited partnership, the LLLP consists of one or more general partners and one or more limited partners. The key advantage of this form of ownership is that the general partners receive limited liability on the debts and obligations of the LLLP. California law does not allow for an LLLP to be formed in California. However, an LLLP that is formed under the laws of another state must register with the California Secretary of State prior to conducting business in the state.
- The general partners manage the business operations of the LLLP, while the limited partners typically only maintain a financial interest.
- The LLLP is a flexible form of business.
- It is designed to offer limited liability to all partners in the partnership.
- The partners will decide the structure of the organization and the distribution of profits and losses. A formal, written partnership agreement is advisable.
- The items of income, deductions, credits, and distributive shares of property, payroll, and sales flow through from the partnership to each partner’s California Schedule K-1.
- Each partner is responsible for paying taxes on their distributive share.
- An LLLP remains in existence until any agreed upon termination date.
- LLLPs do not pay income tax but they are subject to the annual tax of $800. See Filing Guidelines below for more information.
- Every LLLP that is doing business in California, has California source income, files a certificate or registers with the California Secretary of State is required to file Form 565. Furthermore, every LLLP that is doing business in California, or has filed a certificate or registered with the Secretary of State must pay the annual tax of $800.
- The return due date is the 15th day of the 4th month after the close of the taxable year. LLLPs must complete Schedule EO, Pass-Through Entity Ownership (565), to report any ownership interest in other partnerships or limited liability companies regardless of whether these entities are required to file a tax return in California, or are subject to California annual tax or LLC fee.
- LLLPs doing business or deriving income from within and outside of California will use Schedule R to determine their California source income. The LLLP provides each partner with a California Schedule K-1 that states the partner’s distributive share of the partnership’s (LLLP’s) items of income, deductions, credits, property, payroll, and sales.
- To determine if you are doing business in California and/or if your partners are also considered doing business in California, see Doing Business Rules in California.
The LLLP has no estimated tax requirements. However, partners may have to make estimated tax payments for their own reporting purposes
Withholding on California Source Income
- A LLLP is considered a withholding agent if they control, receive, have custody of, dispose of, or pay California source income. Get Small Business Withholding Tool | PDF version.
- A withholding agent is required to withhold from all payments or distributions of California source income made to a nonresident payee unless the withholding agent receives authorization from us for a waiver or a reduced withholding amount. Withholding is optional, at the discretion of the withholding agent, on the first $1500 in payments made during the calendar year.
- If a LLLP is required to withhold and remit backup withholding to the Internal Revenue Service, they also are required to withhold and remit to Franchise Tax Board, except for instances that are specifically excluded for California purposes.
- The LLLP may be required to withhold taxes if the LLLP distributes California source taxable income to a nonresident partner. For more information about withholding, see FTB 1017, Resident and Nonresident Withholding Guidelines.
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