Incorporator The Journal of U.S. Formation
Start Free Quiz
Editorial 6 MIN READ

LLPs and LLLPs, a decade in: what the professional-firm wrapper actually does in 2025

The RUPA malpractice shield, the state registration paperwork, and why CTA reporting looks narrower than it did in December

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 6 sections
  1. The shield, and what RUPA §306(c) actually says
  2. LLLPs, and why half the country does not do them
  3. Subchapter K, the 2024 Tax Court cases, and the functional test
  4. The Corporate Transparency Act, after McHenry and the March IFR
  5. Who actually uses each form in 2025
  6. Sources

limited liability partnership is a general partnership that has filed a piece of paper with the state and, in exchange, bought its partners a liability shield against the malpractice of the other partners. In 2025 that pitch still holds up, mostly for law firms, accounting firms, and medical groups that cannot or will not use a corporation.

A limited liability limited partnership is a limited partnership that has filed the equivalent paper, picking up the same shield for its general partners. Fewer states recognize it and fewer firms use it.

The shield, and what RUPA §306(c) actually says

The LLP shield is a statutory override of the default rule that partners in a general partnership are jointly and severally liable for partnership obligations. Under Revised Uniform Partnership Act §306(c), adopted in some form by most states, an obligation of a partnership incurred while it is an LLP is solely the obligation of the partnership, and a partner is not personally liable for that obligation "solely by reason of being or so acting as a partner."

Delaware's version lives at 6 Del. C. §15-306(c), with the statement of qualification filed under 6 Del. C. §15-1001: a one-page filing of name, chief-executive-office address, partner count, and a statement that the partnership elects LLP status. The name must contain "Registered Limited Liability Partnership," "Limited Liability Partnership," "L.L.P.," or "LLP."

The shield is not absolute. A partner remains personally liable for their own tortious conduct and for the conduct of a person the partner supervises or directs. An accounting partner who signs an audit opinion is liable for that opinion; the office-mate who had nothing to do with the engagement is not. Contract liability, including firm debt and lease obligations, is covered. That coverage is the reason the form got written after the S&L partnership failures of the early 1990s.

Several states condition the shield on insurance or registration. Texas requires LLPs engaged in the practice of law to register as professional LLPs, with rules traceable to Texas Government Code §81.101 read together with the Business Organizations Code. New York conditions its shield on Department of State registration and on insurance or bonding for professional firms.

LLLPs, and why half the country does not do them

An LLLP is, mechanically, a limited partnership that has elected LLP status. The election gives the general partner, who would otherwise be fully liable for partnership obligations, the same shield that partners in an LLP enjoy. The limited partners were already limited; the point of the LLLP is the GP.

Under 6 Del. C. §17-214, a Delaware limited partnership becomes an LLLP by filing a statement of qualification with the Division of Corporations and reflecting the election in its certificate of limited partnership. The name must include "Limited Liability Limited Partnership" or "LLLP." Florida, Texas, Arizona, and most of the rest of the Uniform Limited Partnership Act states recognize the form.

California and New York do not recognize a domestic LLLP. Neither has statutory authorization to form one, and an LP in either state that tries to pick up LLP-style protection for its general partner does not get one. Both states will generally register a foreign LLLP properly formed elsewhere, though the in-state liability analysis gets interesting. If your real-estate fund has a California nexus and you want the GP shielded, the practitioner's answer is usually an LLC as the GP of the LP. That is why LLLPs are a minority form: the states most likely to host large LP activity do not uniformly recognize it, and the LLC-GP workaround is available everywhere.

Subchapter K, the 2024 Tax Court cases, and the functional test

An LLP and an LLLP are both partnerships for federal tax purposes under Subchapter K. The partnership does not pay income tax; it files a Form 1065 and issues K-1s to the partners, whose distributive shares must either have substantial economic effect or follow the partner's interest in the partnership under IRC §704(b).

The interesting development for LLLPs over the last two years is the self-employment-tax question for general partners. The Tax Court's opinion in Soroban Capital Partners LP v. Commissioner, 161 T.C. No. 12 (Nov. 28, 2023), and the case's merits decision in 163 T.C. No. 1 (2024), held that the IRC §1402(a)(13) exclusion from self-employment earnings for "limited partners, as such" is not a bright-line label test. Whether a partner is a "limited partner, as such" turns on a functional analysis of what the partner actually does, not on the state-law label on the partnership agreement.

For an LLLP, this matters. A general partner who signed the GP line but also runs the fund, sources deals, and takes management-fee allocations is going to struggle to claim the distributive share is exempt from SECA. The same analysis reaches state-law limited partners who work in the business. Funds forming now should assume the functional test is the working rule.

The Corporate Transparency Act, after McHenry and the March IFR

The Corporate Transparency Act defines a "reporting company" at 31 U.S.C. §5336(a)(11) to include, among other things, any corporation, LLC, or similar entity "created by the filing of a document with a secretary of state or a similar office." An LLP is formed by filing a statement of qualification. An LLLP is formed by filing a certificate of limited partnership plus a statement of qualification. On the text alone, both are reporting companies.

That was the operative read through most of 2024. The Supreme Court's stay order in McHenry v. Texas Top Cop Shop, issued January 23, 2025, lifted the remaining injunction while the merits question continued to work its way up. FinCEN treated that order as the trigger to announce, in an interim final rule published in the Federal Register on March 21, 2025, that it would exempt domestic reporting companies from beneficial-ownership reporting and narrow the CTA's reach to foreign reporting companies doing business in the United States.

For domestic LLPs and LLLPs in June 2025, the IFR is the governing posture. A domestic LLP or LLLP operating in the United States is, as FinCEN has positioned it, not required to file a BOI report while the IFR stands. A foreign LLP or LLLP registered in a U.S. state still files, subject to exemptions. Comment has been running and the rule is subject to revision; nothing about the posture is permanent. The statute still covers these entities. Agency treatment on the day you ask is the live question, and right now it is lighter than in December.

Who actually uses each form in 2025

Law firms, accounting firms, and medical groups dominate LLP use. The draw is the combination of partnership tax, professional regulatory comfort, and the malpractice shield. An AmLaw 100 firm in Delaware or New York is almost certainly an LLP; a California counterpart often uses a different professional form because California imposes separate registration and insurance requirements on LLPs in the law and accounting professions under Corporations Code §16956.

LLLPs live mostly in real estate and in private-fund GP structures in Delaware and a few other ULPA states. The more common structure in sophisticated funds is an LP with an LLC as the GP, and in California or New York that LLC-GP wins by default.

The decade-plus record on these forms is stable. The statute has held and the shield has held. The 2025 movement is at the partner-level tax treatment, running against labels, and at the federal reporting regime, running the other way for the moment.

Sources

Keep reading

More from the journal.