Which One is Better: An LLC or LLP?

which one is better an llc or llp

Are you thinking about launching your very own business? If so, this can be an exciting, uncertain time. While it is commendable to finally put your years of experience to good use in the name of starting your own venture, you are probably discovering that there is much planning and preparation required before you can get your business off the ground. At the outset, there are a few key items that you are going to want to address, and one matter of particular importance is deciding how you will legally structure your organization. Is a Limited Liability Company (LLC) right for you? Does a Limited Liability Partnership (LLP) make more sense for your business? To get the answers to those questions, you may have to dig into figuring out which one is better, an LLC or LLP

While these are just two examples of how you can organize your business (S-corps, C-corps, and sole proprietorships are other common options), they are popular choices among entrepreneurs. Why should you think about giving your business a legal structure? Well, there are a number of tax and liability benefits that come with both LLCs and LLPs. It can also help you in determining how you wish to manage your business on a day-to-day level, as well as how profits will be shared among members or partners. Read on to learn more about the nuances of LLCs and LLPs.

What Is a Limited Liability Company?

An LLC is a way to structure your business that is relatively low-cost and low-maintenance. You are granted the protection of “limited liability” when you form an LLC, which means that your personal assets cannot be subject to legal judgments against your business. In other words, if your business goes bankrupt, you will not need to worry about losing your home or retirement assets. An LLC is also deemed a pass-through organization by the Internal Revenue Service (IRS). This means that profits generated by your business are not taxed off the top–rather, they pass through to the LLC’s members, who then pay personal income tax.

Is a Limited Liability Partnership Right for You?

An LLP is very similar to an LLC with one key distinction: In an LLP, individual partners can be found liable if they committed negligence, while the other partners can protect their assets. LLPs are not available in every state, and they are generally more suited to licensed professionals, such as doctors, lawyers, dentists, or architects. An LLP is also a “pass-through” entity, so it does come with the same tax advantages as an LLC.

which one is better an llc or llp

Which One is Better: An LLC or LLP? It Depends

Determining which is right for you, an LLC or an LLP depends largely on where your business is located, and which industry you are working in. Regardless of which structure you land on, we can help you process your formation paperwork online. To learn more, visit our Frequently Asked Questions page, or contact one of our customer service agents by phone or email today.