A limited liability partnership or LLP provides you and other members of your company with liability protection. According to the U.S. News, individual members are not liable for their partners’ misconduct and are not liable for the partnership’s liabilities.
How is an LLP different from an LLC?
An LLC is a limited liability corporation and the major difference is how much liability protection you have. In an LLC, personal responsibility only occurs when it comes to business mismanagement. With an LLP, on the other hand, you may be responsible for your actions, but not your partners’ actions. For tax purposes, an LLP is a partnership, not an LLC.
Why should you consider an LLP?
As an LLP, you and your partners have the option to pool your resources. You can invest in securities that you may not have the ability to alone. When you are a part of an LLP, every partner has obligations to the business. You all share in the profit, the loss and all investments.
As an LLP, your company is a pass-through entity. All income, credits, and deductions your company earns pass through the partners and avoid double taxation. There is also flexibility in how you run the business. You and your partners decide who has control over how much of the company. You could have one managing partner or a committee of partners to make major decisions on behalf of the company. Many businesses choose to delegate duties to different partners based on experience.
When it comes to an LLP, you share all of the risks and benefits of your business with partners.