If you run a company, you may be curious about the legal structure your accounting firm should take, specifically a question on whether an accounting firm is an LLP or an LLC. It’s a fair question, and the answer will be contingent on your case’s particulars. In this article, we will present some basic information on limited liability partnerships (LLPs) and limited liability companies (LLCs), as well as some points, to consider when choosing the formation of your accounting business. LLCs and LLPs are both viable options for accounting firms. The following are some of how this might be beneficial to your company.
Tax Benefits
To begin, a limited liability partnership (LLP) is distinguished from a limited liability corporation (LLC) by the designation “limited liability.” The phrase “limited liability” refers to the fact that an LLP limits its partners’ liability for the business’s debts and obligations (hence the name). In contrast, an LLC limits its members’ liability for the business’s debts and obligations. This is the simplest way to remember the difference between these two types of business entities (hence the term “limited liability”). Choose a limited liability partnership (LLP) as your company structure if you wish to reduce the risk of being held personally responsible for any errors your business partner may commit. Choose an LLC if this is not your concern and you want to reduce the amount of money spent on filing costs.
Those Asking, Can an Accounting Firm Be an LLP Or LLC Will Enjoy Limited Liability
Forming a limited liability partnership is advisable if you want to restrict your legal obligation. Because there are no general partners in an LLC, all of the owners are considered members and have an equal say in how the firm is run. There are no general partners in an LLC, unlike in other corporate arrangements, such as S and C corporations. LLPs don’t distinguish between active and passive partners as traditional partnerships do; all members of an LLC are treated equally.
It’s always a good idea to verify with your state’s secretary of state or similar entity to be sure that you may incorporate an LLP in your state. There are no limits on who may create an LLP. As long as each member agrees to be a member, any number of individuals may form one. The number of members in an LLC might vary greatly. Consider forming a single-member LLC rather than a standard partnership or corporation if you have one owner (which could cause problems down the line if you hire new employees).
Ease Of Operation
LLCs or LLPs are a great option for those who want more control over their company’s name and structure. Can an accounting firm be an LLP or an LLC? Having the liability protection of an LLC with the tax structures of an LLP is a relatively popular option for small firms with partners. At all times, one partner must be a member of both organizations to be considered a “partner.” To do this, you’ll need two members in the LLC and one in the LLP, both legal entities. There are times when just one individual should own both firms (such as when you already have a company before starting a new business venture with your partner). On the other hand, a single-member LLC or LLP is an option if you don’t want to work with a partner.
Transferability
If you ever conclude that you want to sell your company, it is in your best interest to provide the new owner with the choice of purchasing all of the assets or a portion of them. Because corporations are not legally allowed to separate shares of stock from assets, it may be difficult for a prospective buyer to acquire a portion of your firm if it is constituted like a corporation. Transferable ownership arrangements, such as limited liability companies (LLCs) and limited liability partnerships (LLPs), make it possible to establish several owners with varying ownership percentages.
In other words, if you want some investors without completely giving up control of your company, you can allow those investors to own varying amounts of stock in exchange for each one owning a portion of the assets that belong to the company in exchange for allowing those investors to own varying amounts of stock. This is an option if you want some investors without completely giving up control of your company.
Flexibility
Limited liability partnership (LLP) is more flexible, but you’ll need more than one owner for this business structure. A great option if you’re open to partners coming and going or if you anticipate the need for outside investment for your company at some time in the future. If you have no idea what your firm will be doing, an LLP is a fantastic option. LLC stands for Limited Liability Company if you choose a more conventional company structure with just one owner. With this structure, all owners are shielded from liability since there is no limit on the number of members who may join the business. If one of the partners dies or departs, another may take over without worrying about legal modifications. This makes it easy to transfer ownership.”
Whether you’re looking for a CPA in your area or trying to learn more about the accounting industry, the Corporation Center is here to help. We’re an independent firm that provides information on setting up corporations in all 50 states and other resources to help business owners succeed. Our team is happy to answer your questions—no matter the topic or scope—so feel free to call us at (800) 580-4870. If you’d like some assistance finding a local accountant, go online to our website for a free search tool that will connect you with accounting firms near you.
