Limited Liability Partnership (LLP)
Similar to an LLC, a limited liability partnership (LLP) contains elements both of partnerships and corporations. In an LLP, one partner cannot be held liable for another partner’s misconduct or negligence.
An LLP should not be confused with a limited partnership, which has both general and limited partners holding varying levels of input and responsibility. In contrast, an LLP can be structured so that all partners participate equally in decision-making.
California and New York limit the use of LLPs to professionals (lawyers, doctors, accountants, etc.), thus removing it as a choice for small-business owners. As the ‘P’ denotes, the LLP is a partnership; therefore, it must have two or more owners. With an LLC, only one owner is required. For reasons like these, the LLC is often the preferred choice for small businesses.
In many states, the owners of an LLP are afforded less protection against possible claims made by the owners’ creditors, as compared to the LLC. Both the LL P and LLC require filing an Articles of Organization with the appropriate agency in your state — typically the Secretary of State or a subsidiary. States that offer both entities will use different forms for LLPs and LLCs, but the required information is similar.