There are different forms of partnerships in Illinois.  

A partnership is an association of two or more persons who combine their labor, skill and/or property to carry on as co-owners of a business for profit.  The Uniform Partnership Act (1997) ("UPA") governs the formation of partnerships in Illinois. 

Each partner acts as principal on his/her own behalf, and agent on behalf of the other partners.  Each partner has joint ownership of the partnership as a whole, but does not own any separate portion of partnership property.  There are no formal requirements for formation of a partnership, and one is formed by default if more than one person is carrying on a business.  The entity itself is not taxed, but instead tax liability is passed through to the partners in pro rata shares.

One of the disadvantages to a partnership form is that if one partner dies or leaves, the partnership dissolves.  Partnership shares, therefore, are not freely transferable.  In addition, each partner can bind the partnership, and all partners are personally liable jointly and severally for the debts and obligations of the partnership.

The limited partnership (LP) addresses the problem of exposure of the partners to unlimited personal liability by separating the partnership into two classes--a general partner, who remains personally liable for the partnership's obligations; and the limited partners, who possess the same personal liability protection as the shareholders of a corporation would.  Although the limited partners are shielded from personal liability, the partnership remains liable for the actions of the general partner's wrongful act or omission, or other actionable conduct.

The Uniform Limited Partnership Act (2001) governs the formation of limited partnerships in Illinois.  Among the requirements for formation and operation of an LP include the filing of a certificate with the Illinois Secretary of State.

One of the benefits of an LP is that limited partners may deduct their losses for taxation purposes up to the extent of their investment, which is not available to corporation shareholders.  Limited partnership interests are freely transferable, but are subject to filing requirements and fees. 

The limited liability limited partnership (LLLP) is also governed by the Uniform Limited Partnership Act (2001).  In the LLLP, the general partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for obligations arising in tort, contract or otherwise, solely by reason of being or acting as a general partner (see 805 ILCS 215/404(c)).  The liabilities of the LLLP are the partnership's alone. 

The consent of each partner is necessary to add a statement to the certificate of limited partnership that the limited partnership is a limited liability limited partnership.  The LLLP must file the same certificate with the Illinois Secretary of State as an LP, but must elect LLLP status by checking a box on page 1 of the certificate.

The formation of a limited liability partnership (LLP) is governed by Article 10 of the UPA.  There is no separate statute outside the UPA concerning LLPs.  Under Article 3 of the UPA, partners in an LLP are shielded from personal liability for the debts and obligations of the partnership, regardless as to how the debt or obligation is created (specifically, see 805 ILCS 206/306(c)).  The partnership remains jointly and severably liable, however, for a partner's wrongful act or omission, or other actionable conduct, if the partner is acting in the ordinary course of business of the partnership or with authority of the partnership.  This liability shield for partners is one benefit of the LLP over the general partnership form.

The LLP must first be established as a general partnership.  Once a partnership is formed, members of the partnership must vote to amend the partnership agreement to become an LLP.  The LLP then files a statement of qualification with the Illinois Secretary of State.  An LLP is often called a registered LLP because of this filing requirement.  A renewal statement must be filed each year.  The filing and fee requirements are one of the downsides to pursuing an LLP business form, although the filing requirements are not overly-burdensome.

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