A limited liability partnership, or LLP, is a business structure designed for partners who want a voice in managing their firm, but do not want to share liability. Generally speaking, a partner in an LLP is not responsible for the debts or liabilities of the other partners.
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A partnership is a business owned by two or more people. There are three different types of business partnerships:
General partnerships may require filing a DBA/Business Name statement with the state or county if the business name does not include the surnames of the partners. Forming either a limited partnership or a limited liability partnership requires filing a Certificate with the Secretary of State or other appropriate state agency.
No. However, it is usually a good decision for partners to work out the details of the partnership and create a written agreement.
Costs less to set up. A partnership costs less to set up and run than an LLC. An LLC has initial formation fees, filing fees and annual state fees. However, these costs may be partially offset by lower insurance costs.
Allows owners to limit their liability when LLC is not an option. In many states, certain types of professions are not allowed to operate through LLCs. In these states, professionals have the option of operating through an LLP in order to protect their liability.
May not be available to non-professionals. In some states, only certain professionals, e.g. lawyers or accountants, are permitted to form LLPs.
More difficult to raise money. It's generally not possible for an LLP to raise money from outside investors. On the other hand, an LLC has many avenues to raise capital. It can admit new members by selling membership interests, and it can create new classes of membership interests with different voting or profit characteristics. Plus, investors can be assured that they are not personally liable for company debts.
More difficult to transfer ownership. The business of partnership cannot be sold whole. Instead, each of its assets, licenses and permits must be individually transferred. New bank accounts and tax identification numbers are also required. Ownership interests in an LLC may generally be sold to third parties without disturbing the continued operation of the business.
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