Why choose a Limited Liability Partnership (LLP) structure for your business?

Updated: Sep 1, 2020

Content provided by BizFilings, a trusted partner of Upwird


Why choose a limited liability partnership (LLP)? Typically only business owners in professions that require a state license in order to practice, such as accountants, architects, attorneys, chiropractors, doctors, dentists, etc., are allowed to form LLPs. An LLP is similar to an LLC: all partners have limited liability for business debts, but be aware that in many states the protection of limited liability partnerships are less than what LLCs or corporations receive. Advantages of limited liability partnerships With LLP formation, typical advantages include:

  • Limited liability protection. Partners are not held personally responsible for business debts and liabilities (the limited liability partnership does not protect against liability for partners’ actions, however).

  • Pass-through taxation. No tax is paid at the business level. Profits or loss are reported on the partners’ tax returns, and any tax due on business income is paid at the individual level.

  • Conversion from general partnership. LLPs typically offer easier conversion from a general partnership to an LLP than to a LLC or corporation.

  • Flexible management. Partners have more flexibility in management structure and can determine which partners are responsible for the day-to-day operations.

  • Few formal requirements. A limited liability partnership has fewer formal requirements and annual paperwork than corporations.

How is an LLP formed? In order to register a business as an LLP, formation documents must be filed with the appropriate state agency, and necessary filing fees paid.

LLP Key Benefits Unlike the limited partnership (LP) all partners in a limited liability partnership are typically not personally responsible for the debts and liabilities of the business or practice. LLPs more closely resemble LLCs in that regard; however, LLPs are often required to have insurance policies to cover personal liability. Essential Considerations Since regulations differ across state and local jurisdictions, the registrations required for your business are unique depending on the location and your business operations. However, payroll tax and sales tax are common registrations for businesses in many state and local jurisdictions.


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