A limited liability partnership (LLP) is a business entity structure. At its core, an LLP is a partnership composed of two or more individuals who agree to run a business together.
In a general partnership, all partners of the business are typically liable for the debts and liabilities of the business and the other partners. However, the cornerstone characteristic of a limited liability partnership is limited personal liability. Thus, in an LLP, while partners might be responsible for the overall liabilities incurred by the business, they are generally not liable for the errors and omissions of their fellow individual partners.
It’s worth pointing out that some states have relatively rigid restrictions regarding LLP formations. Specifically, California, New York, Oregon, and Nevada all specify that LLPs are only for certain types of professionals (i.e. doctors, lawyers, accountants, etc.).
Notably, there are several other business entity structures you can choose from. Thus, a limited liability partnership may not be the right entity type for all businesses. Some other common business structures in the U.S. include:
If you’re still not sure that an LLP is the way to go, speak with a legal professional in your state to discuss these other types of entity structures and determine whether an LLP is suitable for your needs and goals.
Below are some common types of businesses that are sometimes formed as LLPs:
There are some advantages to setting up your small business as a limited liability partnership, including:
Importantly, there may also be some disadvantages to consider:
Despite these disadvantages, an LLP may still be the way to go depending on your circumstances. Check out our other small business resources or speak with a business lawyer in your state to learn more about LLPs and see whether forming one makes sense for your business.
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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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