You understand your customers and your competitors as an entrepreneur or new business owner. For many, choosing a business structure can be a difficult process. What is the difference between LLP and LLC in terms of legal structure?
Once you know how to create an LLC and LLP, as well as who can do so, and the legal protections and benefits they provide, the decision isn’t difficult.
Let’s begin with the basics. A Limited Liability Company is an LLC. It is a separate legal entity which protects its owners from the liability of the company, similar to a corporation. However, it also offers the tax benefits that a sole proprietorship and partnership offer. The LLC does not have to comply with many of the corporate requirements. This includes director meetings, shareholder requirements etc.
The LLP is a limited liability partnership that offers some protection to its partners from personal liability. The LLP, like the LLC, is a hybrid between a corporation and a partnership. This gives the best tax benefits and liability protection. The LLP does not have a separate tax entity and all profits and losses pass through to its partners.
What is an LLC?
Limited Liability Company (LLC) is a flexible business entity which combines the protection and simplicity of a corporation, with the tax benefits of a partnership. The members of an LLC include individuals, corporations, other LLCs or foreign entities.
Members of an LLC, unlike shareholders in a corporation are not generally personally liable for a company’s liabilities or debts. The personal assets of LLC members are generally protected from creditors.
What is a Limited Liability Partnership?
LLPs, or Limited Liability Partnerships, are a form of partnership in which all partners enjoy limited liability protection. They are therefore protected against the debts and obligations of the partnership, as well as from the actions of their fellow partners.
Professionals such as accountants, lawyers and architects use LLPs to protect their assets against potential malpractice or negligence claims that may arise from the actions of a partner.
