Also known as: limited liability principles · limited liability
Written by attorneys · grounded in primary & secondary sources — see below
A statutory protection shielding partners in a limited liability partnership from personal liability for the entity's debts and obligations incurred during its status as an LLP. The protection applies even if the partnership agreement contains inconsistent provisions and survives dissolution of the entity.
Leo Lynch and Lars Lindstrom formed Linden Logistics as a limited liability partnership. The firm incurred a large equipment lease obligation while operating as an LLP. A creditor sued Lars personally for the unpaid balance. The court dismissed the claim against Lars because the debt was incurred while the partnership held LLP status.
Maria Morales joined an existing LLP that had already incurred a vendor obligation. After the firm defaulted, the vendor sued Maria personally. The court dismissed the claim because the debt had been incurred while the entity held LLP status and the statute shields partners from such obligations.
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Nadia Novak and Neil Norris operated an LLP that later dissolved. A landlord sued Neil for unpaid rent incurred during LLP status. The court dismissed the action because the limited-liability shield survives dissolution and applies to debts incurred while the entity was an LLP.
Oscar Ortiz and Olga Olsen signed a partnership agreement stating partners would remain personally liable for LLP debts. A supplier sued Olga for an obligation incurred during LLP status. The court dismissed the claim, holding that the statutory shield prevails over contrary agreement language.
Paula Patel and Peter Park formed an LLP that borrowed funds from a bank. After default the bank sued Peter personally. The court dismissed the suit because the loan was incurred while the partnership held LLP status and the statute bars personal liability solely by reason of partner status.
Quinn Quinn and Rita Ruiz operated an LLP that leased equipment. When the firm defaulted the lessor sued Rita's spouse for contribution. The court dismissed the claim because the statute protects partners from both direct and indirect liability for obligations incurred during LLP status.
The limited-liability principle shields partners from personal liability for entity obligations incurred while the entity is an LLP. Partners remain subject to separate statutory rules governing distributions that violate solvency standards, but those rules operate independently of the LLP shield itself.
Supporting sources
The principle shields partners from personal liability for entity obligations incurred while the entity is an LLP. Separate distribution-liability provisions may still apply when partners consent to unlawful distributions and breach the duty of care, but those provisions are distinct from the LLP shield.
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The limited-liability principle protects partners from personal liability for debts incurred during LLP status. Recovery for improper distributions belongs to the partnership and may become an asset reachable by creditors, but creditors have no direct claim against partners under the LLP-shield statute itself.
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…the United States, where its subsidiary, Mercedes-Benz USA, LLC (MBUSA), distributes Daimler vehicles. MBUSA is a Delaware limited liability company and has its principal place of business in New Jersey. MBUSA’s marketing and sales efforts in California are undertaken by a regional office in Costa Mesa and a network of…