LLC vs LLP – Which Is Right For Your Business?
In today’s post, we’re going to talk about the difference between an LLC and an LLP.
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Before we start I would like to mention that this is in no way legal or tax advice.
LLC vs LLP
For anyone wondering, both of these terms are acronyms!
LLC is short for Limited Liability Company
and LLP is short for Limited Liability Partnership.
Both are U.S. Business Entities and even though they sound like they are nearly the same (with both having Limited Liability as the first two words) of the three word entity, they are actually different business structures.
Since our website and YouTube channel have many posts and videos discussing and defining LLCs, we thought this video would primarily focus on defining what an LLP is and why that business structure may or may not be the right setup for you and your business. See our YouTube channel for tons of free LLC information!
LLP
Limited Liability Partnerships are formal business structures that offer the partners some legal protection from liabilities that the Partnership may incur.
In many instances, it is wise to consider the pros and cons of an LLC vs an LLP. LLCs are good for nearly all types of businesses, both large and small.
LLPs on the other hand are more suitable for specific niches that require a license to perform such as attorneys, architects, and accountants. Some states do not allow these particular professions to be set up as LLCs, in these cases, these businesses are often set up as LLPs.
LLC vs LLP
Another difference in LLCs vs LLPs is that all LLPs require a minimum of two partners. LLCs on the other hand can easily be set up with only one member.
LLCs and LLPs both offer some liability protection.
If you are operating a business without a separate business entity, you are putting yourself at risk.
If something goes wrong within the business, then you as an unprotected business owner, have put yourself in a situation of unlimited liability. You are responsible no matter what happens related to the business.
The final difference we will mention in today’s post regarding LLC vs LLP is the management structure required.
An LLC is quite simple and easy to set up and run. You can get an LLC in around 10 minutes time and start enjoying the incredible advantages and protection it offers. In almost every case an LLC makes the best choice!
Setting up an LLP requires participation from all of the partners. These partners will have equal shares in the running of the business and an equal share of the profits although the exact nature of responsibilities does need to be spelled out
LLCs offer more flexibility in terms of the management structure than LLPs. Unless your state prevents your particular style of business or occupation from operating as an LLC you should most likely form a regular LLC, as it is the easiest to form, operate, and maintain!
If you’re reading this post, you’re probably considering starting a business. We have a free 10-Step How To Start a Business PDF download that we would like to give you – absolutely free – so be sure to check that out.
Your LLC Guru Philosophy
We believe that everyone in business deserves the protection an LLC can provide. We are making the business world a better place one LLC at a time!
In our next post, we will unpack more details around LLC’s. Check out some of our other posts or watch our videos on YouTube so you can learn more helpful information about LLC’s and how to use them to protect yourself in business.
This is your LLC Guru thanks for reading!