What Is the Principal Advantage of an LLP Over an LLC?

A limited liability partnership (LLP) and a limited liability company (LLC) are common types of business organizations. For most businesses, LLCs offer the same or better benefits than LLPs. For certain companies, however, LLPs are the better, and sometimes the only, choice.

Limitation

Some states prohibit certain types of businesses, such such as professional service firms, from forming LLCs. For law and accounting firms, for example, an LLP might be the only choice.

Flexibility

Even if the state in question allows LLCs for your profession, forming an LLP gives you the option to expand your business into states that prohibit LLCs, without having to convert to another business form first.

Advantages

For a business not affected by state law prohibitions on LLCs, an LLP can provide certain advantages. LLPs require less paperwork and recordkeeping, and in some states that do not need to be registered at all. It is also simpler and cheaper to convert a general partnership into an LLP than an LLC. Unlike an LLC, which gives different levels of authority to its members, an LLP has a decentralized management structure. This makes it more suitable for a business where all owners want the same management rights.

References

• LLC Explained: What's the Difference between an LLC and LLP?
• Companies Formation Worldwide: American LLPs vs. LLCs
• Architects/Engineers Professional Network: Limited Liability Partnerships and Limited Liability Companies
• Diffen: LLC vs. LLP