Limited Liability Partnerships - What is Direct Partner Liability?

Auguest 5, 2004
By Richard Smith, LLB

Direct partner liability is probably one of the most important issues you're likely to come across in limited liability partnerships (LLP).

In short, all state's limited liability partnership laws stipulated that the partners of the LLP will become personally liable for certain actions they undertake. Importantly, these state's laws spell-out that a partner's own negligence and/or malfeasance will subject such partner to the rules of direct partner liability.

More importantly, however, is the fact that those same state laws provide that a partner of an LLP may also be the subject of direct partner liability in the event that there are any wrongful acts or misconduct by any person under that partner's "direct supervision and control".

Limited Liability Partnerships - Direct Supervision And Control Liability
Rather fortuitously, the issue of what constitutes "direct supervision and control" is not defined in any of the state's LLP laws. Rather, this issue needs to be addressed by the judge in charge of the case.

Having said that, it is generally accepted that in order to be subject to direct supervision liability, the partner needs to fulfil both elements of the liability; namely, "supervision" and "control", rather than one or the other.

Consequently, it is possible for a partnership to reduce the risk of its partners falling foul of this particular issue by dividing the roles of supervision and control; for example, by having one partner who supervise the work of an employee of the partnership, but another who has control over that same employee. This way, the partners' risk is reduced.

Having said this, the partner's risk here is not all together elevated as the direct supervision and control test can apply to a piece of actual work, rather than the overall niceties of the office. So, keep this issue in mind when you are parceling out work to the employees of your partnership.