Define Limited Liability Partnership

The limited liability partnership (LLP) is a relatively new type of business entity. A limited liability partnership combines the elements of a general partnership with that of a limited liability company.

Liability

A big reason a business may form an LLP is to limit the liability of the partners. Forming an LLP helps protect the personal assets of the partners. In other words, creditors may only be able to get assets from the partnership as a means of debt collection.

Types

In many cases, an LLP is the preferred business type of working professionals such as accountants and lawyers. Since these professions have high exposure to malpractice lawsuits, forming an LLP protects the business interests of uninvolved partners.

Operations

Each partner has an equal voice in terms of how the partnership will operate. Each partner can take an active role in management decisions and activities of the partnership.

Time Frame

Your LLP will stay in existence as long as all partners remain partners. An LLP may have an agreed upon termination date, when the partnership will effectively dissolve.

Tax Considerations

Each partner has to pay tax on their share of the partnership proceeds. Partners of an LLP put profits and losses of the partnership on schedule K-1 when filing their individual tax return.

References

• Lectlaw
• State of California Franchise Tax Board
• Legal Zoom