When you start a company, there are a lot of things you need to understand, such as, “can an accounting firm be an LLP or LLC?” before you can even begin. One of the first considerations you will have is whether to create a limited liability company (LLC) or an LLC for professionals (LLP). A corporation or a limited liability company, for example, are common business forms that business owners are familiar with (LLC). Professional limited liability partnership is more of a mouthful than the more common abbreviation for limited liability partnership (LLP). But what if you want to establish your own accounting business and you’re an accountant? Do you have to pick between becoming a corporation or a limited liability company? Here are ways an accounting firm can be an LLP or LLC.
An LLP Can Have Multiple Partners and Limited Liability for Each Partner
Someone may have told you that there are two kinds of business entities: partnerships and corporations. But what if you wish to launch a firm in which the enterprise’s success depends on several individuals’ contributions (who have the same or similar interests as one another)? Creating a Limited Liability Partnership (LLP) or an LLC is one way to accomplish this goal. An LLC is a great way to start a business with few formalities. It offers all the protections that come with a corporation without having to deal with some of the hassles that come with being incorporated. It is also a great way to start a business in states that do not require a corporation to be registered. For instance, you won’t have to be concerned about your limited liability company (LLC) issuing shares or having to interact with investors and shareholders.
An LLP Can Offer Its Members Liability Protection from Malpractice Lawsuits
Personal and limited liability protection are both available to participants in a limited liability partnership (LLP), often known as a limited liability partnership. This is a two-pronged strategy for shielding the partners of the LLP against malpractice claims and any other potential financial concerns that may come up in the future. If a Certified Public Accountant works for an LLP, not only is he or she shielded from personal liability if they make errors in their client’s accounting but they are also shielded from the risk of losing the money that their clients have invested in their business venture as a result of legal action. For this reason, partnerships are often seen as a more prudent business structure than corporations are. This is a significant difference since most state laws enable accountants to function as sole proprietors and provide their services in whatever format they see fit.
Can An Accounting Firm Be an LLP Or LLC? An LLP Can Provide Tax Advantages Over a C-Corp Structure
Whether you have just begun operating a bookkeeping firm or have been doing so for several years, “What type of structure should my company have?” is likely to be one of the first questions you pose. A limited liability partnership (LLP) is an excellent choice for businesses providing professional services, including accounting services. Since a limited liability partnership (LLP) does not issue stock, it is not subject to the exact requirements of a corporation in terms of annual meetings, shareholder votes, or intricate corporate rules. The members of an LLP structure are individually accountable for the debts and liabilities of their firm, but unlike C-Corporations, they are not subject to double taxation. C-Corporations are susceptible to double taxation. What does this imply for the future of your company? If your company is structured as an LLP, you will be able to be more certain that it will continue to expand without the risk of incurring more expenses or legal overhead.
An LLC Offers Pass-Through Taxation
In other words, the profits of an LLC are taxed only once, on an individual basis, by the members who make up the LLC. After that, they have a lot of similarities. If you have a limited and general partner, you may organize your assets in any manner you like. Individual members of an LLC may contribute assets unrelated to their ownership position, but with an LLP, all partners must participate. In an accounting company, for example, the LLPs would be the partners, and the LLCs would be the customers who bring in money and conduct business with you. All of the LLCs would be owned by the general partners; however, each limited partner would only possess a share in one or two of the companies in question. Multi-partnership structures allow you more flexibility in allocating assets and liabilities as your business expands.
An essential part of starting an accounting practice is choosing the correct business structure. Limited liability corporations (LLCs) and limited partnerships (LPs) are preferred by the government (LLP). Starting a new accounting business may be fun with either of these models. They will propose a course of action for your organization based on their assessment of your objectives and requirements. Don’t hesitate to call the Corporate Center at (800) 580-4870 if you have more questions regarding forming an LLP or LLC, such as, “can an accounting firm be an LLP or LLC?”