4. Limited Liability Partnership (LLP)

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Limited Liability Partnerships (LLPs) are a hybrid of GPs and LPs, typically owned by professionals, like lawyers or accountants, who benefit from pass-through taxation. This means the income from the LLP is taxed only at the individual partners’ tax rates, not at the business level. This structure requires a partnership agreement. When I was an attorney before founding crowdspring in 2007, I was a partner at two law firms, and both were structured as LLPs.

A distinctive feature of LLPs is that while partners are responsible for their own actions, they are not personally liable for the conduct of their partners or the business’s debts and damages. This provides a protective shield for personal assets.

For example, in a law firm structured as an LLP, if one partner is sued for malpractice, the laos rcs data other partners’ personal assets are generally protected. Similarly, in an architecture LLP, one partner’s mistake in a project doesn’t financially jeopardize the other partners.

Pros of limited liability partnerships:
It is simple to form, and paperwork is minimal.
LLPs permit an unlimited number of partners.
Personal liability protection. Individual partners in a consulting LLP are protected from liabilities arising from other partners’ mistakes or negligence.
Flexibility in taxation. An accounting firm operating as an LLP enjoys the flexibility of distributing profits among partners in varying proportions without the constraints of stock structures.
Autonomy in management. Partners in a medical practice LLP can manage their individual practices within the larger partnership structure, enjoying collaboration and independence.