Also known as: limited liability · LLP · LLC liability shield
Written by attorneys · grounded in primary & secondary sources — see below
A legal protection that shields owners of certain business entities from personal responsibility for the entity's debts and obligations beyond their investment in the entity. Owners remain liable only to the extent of their contributions or agreed capital commitments.
Lance Lee and Luis Lopez operate Legacy Motors as a limited liability partnership. The firm incurs a large equipment debt to a supplier. When the supplier sues Lance personally after the partnership defaults, the court dismisses the claim against him because the obligation belongs only to the entity.
Layla Lane and Lamar Lewis form Lattice Systems as an LLC with members in three states. When a supplier sues the LLC in federal court, the court determines diversity jurisdiction by looking to the citizenship of Layla and Lamar rather than treating the LLC like a corporation with its own state of formation.
Select any source to read its text and confirm it supports the definition.
Luna Lang and Lillian Locke form Lone Peak Energy as a limited partnership using the abbreviation LP. A creditor later attempts to hold Luna personally liable for a partnership debt. The court recognizes the name signals standard limited partnership status without the added liability shield of an LLLP.
Legacy Motors LLC winds up operations with assets left after paying outside creditors. The members receive distributions first returning their unreturned capital contributions before any profit split. Personal creditors of individual members cannot reach those returned amounts because the members enjoyed limited liability during operations.
Lexicon Media registers as a limited liability limited partnership using the LLLP designation. A vendor sues one of the limited partners personally for an unpaid advertising debt. The court rejects the suit because the entity's name and formation documents establish that partners enjoy the full limited liability protection.
Luis Lopez and Layla Lane hold equal shares in a close corporation that owns a manufacturing plant. When the corporation offers to buy out one shareholder at a premium, the other demands equal treatment. The court enforces the equal opportunity rule because the corporate form supplies limited personal liability yet requires heightened duties among the owners.
No. General partners remain jointly and severally liable for all partnership obligations. Limited personal liability arises only when the entity is formed or elects status as an LLP, LLC, or corporation under the governing statute.
Supporting sources
An LLC is treated as an unincorporated association. Its citizenship for diversity purposes follows the citizenship of each member rather than a state of incorporation or principal place of business.
Supporting sources
Yes. The shield applies only to debts or obligations incurred while the partnership is an LLP and solely by reason of being a partner. Personal liability may still attach for the partner's own wrongful acts or if the partner personally guarantees an obligation.
Supporting sources
…554 U. S. , . Distinguishing wealthy individuals from corporations based on the latter’s special advantages of, e.g., limited liability, does not suffice to allow laws prohibiting speech. It is irrelevant for First Amendment purposes that corporate funds may “have little or no correlation to the public’s support for the…