If you are starting your own business for the first time, it may seem like you are facing an endless series of questions. From the minor, such as where you will order your office supplies from, to the more important, such as choosing which vendors to work with, you have no shortage of decisions to make. At the outset, you are also going to want to consider what sort of legal structure you will be giving your business. If you have fairly lofty goals and need to generate investment, you may be thinking about filing Articles of Incorporation. If you are like most entrepreneurs, however, a Limited Liability Company (LLC) or Limited Liability Partnership (LLP) may be a more sensical fit. So, in that case, it is fair to wonder: Which is better, an LLC or LLP?
The answer to that question, as you will come to find, is that it depends. Different businesses will have different needs, and while they may sound similar in name, there are some essential differences between LLCs and LLPs. Still, by educating yourself on the nuances of these business structures, you can put yourself in a better position to decide what is right for you and your business.
Understanding the Principles of a Limited Liability Company
A Limited Liability Company is a common business structure. One reason that LLCs are so popular is that they are relatively painless to set up, require little in the way of reporting, and provide a number of valuable benefits.
In an LLC, you and the other members can enjoy the protections of “limited liability”. This means that should your business be financially disrupted by a lawsuit or bankruptcy, you will be able to protect your individual, personal assets. That obviously can mitigate a great deal of risk and, as an entrepreneur, you might find that it gives you some solid peace of mind.
LLCs are also deemed to be pass-through entities by the Internal Revenue Service (IRS). This means that you can pass losses and profits from your business to the members of the LLC for taxation purposes. This status makes forming an LLC an especially financially savvy maneuver.
What Is a Limited Liability Partnership?
A Limited Liability Partnership shares many commonalities with a Limited Liability Company. In an LLP, you do receive the same pass-through status from the IRS. You also get to enjoy limited liability, but with a slight caveat: individual partners can be found liable if they caused negligence. Because of this setup, LLPs make a lot of sense for licensed professionals, such as dentists, doctors, lawyers, or engineers. Unlike LLCs, LLPs are also not available in every state.
Which is Better: An LLC or LLP? We Can Help
If you are going into a partnership with licensed professionals, an LLP may make sense. Chances are, however, an LLC is a better fit for your business. Regardless, at Corporation Center, we can help you process your Articles of Organization online. To learn more, contact one of our customer service representatives by phone or email today.