A limited liability partnership (LLP) is basically a general partnership, but with the addition of giving the partners at least some limited personal liability. There is only one class of partner (general partners).
The degree of liability limitation for an LLP varies from state to state. Some states provide a limitation of personal liability that is similar to a corporation. Some states only limit personal liability for the negligence of a partner. Some states take a middle ground, and limit personal liability for a partner’s negligence, as well as for partnership contracts and other debts (in other words, a partner is only personally liable for his or her own negligence).
Because an LLP is a partnership, it must have two or more owners.
Advantages of a Limited Liability Partnership
Liability protection for all partners. The main advantage of an LLP is that all partners are protected by some form of liability protection, but this also means each partner gets a say in how the business is ran.
Securities laws. Since all members of an LLP are considered general partners, security laws do not generally come into play when the members change ownership.
Required by law. In some states, certain professions are not allowed to form other types of business structures, and are required by law to become a limited liability partnership.
Disadvantages of a Limited Liability Partnership
Multi-state considerations. Some states recognize LLPs formed in other states (called foreign LLPs), and some do not. This could affect the limitation of liability in the other states. A state that limits LLPs to certain professions may not recognize an LLP formed in a state that has no such limitation. A state with the limitation may treat the foreign LLP as a general partnership for purposes of personal liability.
Liability protection. Although an LLP offers all members some form of liability protection, corporations and limited liability companies offer more comprehensive protections and are very popular with business owners.