A limited liability partnership (LLP) is a type of business organization that has features of both a partnership and a limited liability company (LLC). An LLP combines the pass-through taxation benefits of a partnership with the protection from personal liability of a traditional corporation.
In a limited liability partnership, each partner is not responsible for the debts and liabilities of the other partners. This means that only the assets owned by that partner may be used to satisfy creditors and judgments. In other words, personal assets of an individual partner are typically not at risk in the event of a business failure.
Advantages of Limited Liability Partnership
The key advantage of a limited liability partnership is the protection it offers from personal liability. Even if the partnership contracts debt or gets sued, the partners will not have to worry about a court order requiring them to sell off personal assets to pay off the debt. This protection from personal liabilities is similar to what you would get from a corporation.
Furthermore, limited liability partnerships can also provide certain tax advantages. In many cases, the pass-through taxation benefits of a traditional partnership can be combined with the personal asset protection of a corporation. Finally, LLP’s provide flexibility with regards to the management of the organization. Each partner can contribute content expertise, access to resources or capital, depending on the terms agreed upon.
Conclusion
Limited liability partnerships provide the best of both worlds: the individual asset protection of a corporation with the taxation benefits of a partnership. These businesses provide the partners with liability protection and provide flexibility in terms of how the business is run. LLPs require a bit more paperwork than a regular partnership, but can be a great alternative for businesses looking to maximize their legal protection without paying higher taxes.