Most limited liability companies [LLC’s], limited liability partnerships [LLP’s] and limited partnerships [LP’s] have operating agreements [its formation agreement] among the partners that permit adding in a new partner.
An LLC, LLP or LP is a business formed to protect the individual partners from financial liability other than the assets of the entity shielding individual partners from their personal assets. This is true for all members of an LLC and an LLP but an LP has also a general partner and if that partner is a person, he or she is not shielded.
The first step would be to examine the entity’s articles of organization to ensure there is a clause that permits the addition of a new partner. LLP articles of organization already have stipulations about when someone ceases to be a partner: by voluntary withdrawal from the partnership, by death, by mental incapacity, or by declaration or certification of bankruptcy.
Massachusetts has adopted the Uniform Partnership Act for all entity types. Thus, if the operating agreement is silent on any particular subject, including admission of new partners or members, and it’s covered in the statute [M.G.L. Ch. 156C for limited liability companies] then the statute controls. Normally, operating agreements provide that all partners must agree to admit a new partner to the LLC or LLP, unless the articles of organization give that authority to one, leading partner. For a rapidly expanding business, or one that could expand further, an LLC or LLP might not be the best form of organization, as it requires extensive coordination between individuals, as opposed to the “united front” presented to the world as a corporation.
If you have questions about your existing LLP, LLC, or LP or one you plan to form, call our office today. Eric P. Rothenberg is an experienced business law attorney who can review you and your business’s individual needs to suggest the best legal course of action.