Partnerships are common ventures in the business world. If you think about it, it is really no wonder why. Having the opportunity to work with other like-minded individuals and lean on their expertise can better foster the growth of your business. Going into a new enterprise with others also mitigates some of the inherent risks involved in entrepreneurship. By creating a Limited Liability Partnership (LLP), you can actually create an additional layer of liability protections while reaping a number of other valuable benefits. You might find, depending on your industry or line of work, that an LLP can have advantages and disadvantages, much like any other form of business structure.
Any time two or more individuals go into business with one another, that can be considered a General Partnership (GP). A GP does not need to have any sort of written agreement in place to make it official (though that is often recommended), and sometimes they can flourish with a mere handshake or verbal agreement. What an LLP does is take the basic principles of a General Partnership and add some additional, more formal layers. Read on to learn everything you need to know about Limited Liability Partnerships.
What Is a Limited Liability Partnership?
In your experience in the working world, you have almost certainly come across Limited Liability Companies or LLCs for short. An LLP is a very similar structure, though as you will see, there are some important distinctions. Much like an LLC, an LLP is deemed to be a pass-through entity by the Internal Revenue Service (IRS). This consideration means that profits and income (and losses) generated by the business can pass through to the members of the LLP without being taxed first. This is in contrast to, say, a C-corp, which can be taxed “twice”.
An LLP also allows for the concept of “limited liability”. This means that should your partnership face bankruptcy or a costly lawsuit, the individual partners cannot be found personally liable. An LLP does, however, allow for specifically negligent partners to be found liable, which can be a plus for certain types of businesses.
The Drawbacks of a Limited Liability Partnership
The main disadvantage to LLPs is that they are not available in all states. An LLP is also a structure that makes more sense for licensed professionals like doctors or lawyers–fields where individual negligence can be ruinous. States like California and Nevada actually require licensed professionals to form LLPs.
Like LLCs, Limited Liability Partnerships can have certain limitations. For example, they are not ideal for raising outside investment, as that would almost universally call for making an investor a partner.
For Your LLP Online Today!
If you have done the research and decided that a Limited Liability Partnership is an ideal structure for your business, we can help. At Corporation Center, we have easy-to-complete online forms for creating your LLP in a quick and easy fashion. If you would like to learn more about our services, please contact one of our helpful customer service agents by phone or email today.