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Limited Liability Partnership (LLP)

An LLP is a form of ownership in which all the partners receive limited liability protection. However, an LLP is similar to a general partnership in that all the partners can take an active role in managing the day-to-day affairs of the business. The LLP form of ownership is limited in the State of California to persons licensed to practice in the fields of public accountancy, law, or architecture.

In order to form in California, an LLP must first register with the California Secretary of State. An LLP formed in another state must register with the California Secretary of State prior to conducting business in the state.

Key Features

  • The LLP is a flexible form of business.
  • It is designed primarily for specific professional services.
  • The partners will decide the structure of the organization and the distribution of profits and losses. A formal, written partnership agreement is advisable.
  • An LLP does not pay income tax. However an LLP must pay an annual tax of $800.
  • The items of income, deductions, and credits "flow down" from the partnership to each partner through the Schedule K-1. Each partner is responsible for paying taxes on their distributive share.
  • The LLP allows each partner to actively participate in management affairs.
  • The LLP provides limited liability protection to each partner.
  • A LLP remains in effect based on partners agreeing to a termination date.

Filing Guidelines

  • Every LLP that engages in a trade or business in California or earns income from California sources and every LLP that registers with the California Secretary of State is required to file California Form 565.
  • The LLP provides each partner with a Schedule K-1 that states the partner’s distributive share of the LLP's items of income, deductions, and credits.
  • The return due date is the 15th day of the 4th month after the close of the taxable year.
  • An LLP pays an annual tax of $800.

Estimated Tax

  • No estimated tax requirements.
  • The LLP may be required to withhold taxes if the partnership distributes California source taxable income to a nonresident partner. For more information about partnership withholding, see FTB 1017.