LIMITED LIABILITY PARTNERSHIPS
I.
BACKGROUND
-professions (e.g., accountants, lawyers, engineers, doctors, dentists and architects) subject to either express or implied restrictions from carrying on business through corporations – i.e. can’t have limited liability -can’t use limited partnerships since professional partner needs to take part in the business -thus many professions do not have access to limited liability that would protect them against liability for professional negligence -1980s increasing scope of professional liability and increasingly large awards -insurance crisis - difficult to obtain adequate insurance coverage -thus increased the exposure of professionals to personal liability -political pressure in U.S. for some form of liability shield while still allowing professional firms to organise as partnerships -several states enact statutes that allow for “limited liability partnerships” -similar concerns and political pressure led to adoption of limited liability partnership statutes in Ontario, Alberta, Saskatchewan and Quebec, and British Columbia (2005)
II.
LLP STRUCTURES
-U.S. limited liability partnership structures vary - some partners not liable for malpractice liabilities of fellow partners - others partners are not liable for the ordinary debts of the firm - some provide for full limited liability but limit use of LLP to professional partnerships - others provide full limited liability not limited to professional partnerships
III.
THE STRUCTURE OF LIMITED LIABILITY PARTNERSHIPS IN ONTARIO, ALBERTA. SASKATCHEWAN Partial Liability Sheild
A.
-limited to professional partnerships -partners are not liable for the malpractice of fellow partners or employees unless they were directly supervising the activity -partners are not liable to indemnify their fellow partners who have been found liable for malpractice B. Business Name Registration
-must have special cautionary suffix – i.e., not allowed to carry on business unless the registered business name contains the words “Limited Liability Partnership”, “LLP” or their French equivalents
IV.
BRITISH COLUMBIA LIMITED LIABILITY PARTNERSHIP
Where and Since When -in part 6 of the Partnership Act (ss. 94 to 129) -enacted in 2004 and brought into force in January 17, 2005 Who can Form a B.C. LLP -not limited to professional partnerships -professionals only allowed to use if they are permitted to do so under the Act governing their profession [s. 97] -regulations under the Law Society Act allow for the use of LLPs by lawyers Liability Shield -s. 104 – partner liable only for: (a) own negligence or wrongful act or omission; or (b) negligent or wrongful act or omission of another partner or an employee if: (i) knew of act or omission; and (ii) did not take actions a reasonable person would take to prevent it -s. 105(1) – partner liability similar to liability of directors of a corporation for an obligation of the corporation -s. 105(3) – corporation as partner then directors of corporation jointly and severally liable for any liability of the corporation unless they took actions a reasonable person would take to prevent the negligence, wrongful act or omission Business Name -s. 100 – must use suffix of Limited Liability Partnership, LLP or its French equivalent