What is the difference between llp and lllp

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Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice. Meet the Editors. Limited Partnerships and Limited Liability Partnerships. The partnerships that limit personal liability for business debts.

What is a General Partnership? In a general partnership: all partners called general partners are personally liable for all business debts, including court judgments each individual partner can be sued for the full amount of any business debt though that partner can in turn sue the other partners for their share of the debt , and each partner has "agency authority" for the partnership -- that is, each partner can bind the whole business to a contract or business deal.

How Are Limited Partnerships Different? The role of limited partners, however, differs in a few ways: Limited partners do not play an active role in the business.

Limited partners are not personally liable. In return for giving up management power, limited partners get the benefit of protection from personal liability. This means that a limited partner can't be forced to pay off business debts or claims with personal assets. A limited partner, however, can lose his or her financial investment in the business.

Limited partners face slightly different tax rules. An LLC is managed according to its operating agreement which is created by the members. This document outlines the financial contributions made by each member, how profits will be distributed, and who is responsible for management decisions. You may opt to have a member-managed LLC, meaning that all the owners have a say in how the business is run.

Alternatively, you may create a manager-managed LLC, where you have passive owners or investors who are not involved in the decision making for the company. With an LLP, the management structure is determined by the partnership agreement. Like the operating agreement, the partnership agreement details the roles of each partner, their financial contributions, and profit distributions.

Here you have the option to specify that one partner is a "silent partner," meaning that, like in a management-managed LLC, they will receive a share of proceeds but will not participate in decision making for the business. Take time to weigh the pros and cons of each business structure. It is challenging, as well as costly and time-consuming, to change the business structure after you have made the state filings. Overall, if your main concern is limiting liability or tax flexibility, an LLC is probably your best option.

In some cases, the decision may be made for you based on the state where you want to file and the type of business. If you are running the business on your own without partners, you cannot form an LLP. Additionally, not every state recognizes LLPs as a business structure. Some states only allow professional businesses, like accounting firms and law offices, to use LLPs.

Similarly, some professionals may not be allowed to form an LLC, and must go with an alternate structure like an LLP for protection. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.

In fact, states such as California limit LLP formation to lawyers or accountants. Every partner of an LLP must have the appropriate state-issued occupational license, which is not a requirement in a limited partnership. This requirement prevents an LLP from adding talented partners with business expertise, simply because they are not licensed professionals.

In a limited partnership, the general partner must pay self-employment taxes on money received from the company, while limited partners are not required to pay self-employment taxes.

This is in contrast to an LLP, where each partner must pay self-employment taxes on her share of the company's profits and losses. Furthermore, limited partners receive proceeds from the business after the general partners have received their share of company profits.

This is in contrast to an LLP, where each partner receives profits and losses from the company according to her ownership interest in the company.