Discover how LLPs protect partners from business liabilities while maintaining the flexibility of a partnership structure.
Discover how LLPs protect partners from business liabilities while maintaining the flexibility of a partnership structure.
A Limited Liability Partnership (LLP) is a partnership where each partner is protected from personal liability for certain partnership obligations, including debts and claims arising from other partners' malpractice or negligence. LLPs are popular among professional service firms — law firms, accounting firms, architecture firms, and consulting firms. Not all states allow LLPs.
LLPs are pass-through entities — all income and losses flow through to partners' personal tax returns. Each partner reports their share of LLP income on Schedule E and pays self-employment taxes. The LLP files an annual Form 1065 information return.
Pass-through taxation. Partners pay self-employment taxes on their share of LLP income.
| Structure | Liability Protection | Tax Framework | Complexity | Ownership Type | Primary Use Case |
|---|---|---|---|---|---|
| C Corporation | Full | Double (Corporate + Personal) | Complex | Shareholders (unlimited) | Venture capital-funded startups & large enterprises |
| DBA | None (depends on entity) | Same as underlying entity | Minimal | Same as underlying entity | Businesses wanting multiple brand identities |
| LP | Limited (for limited partners only) | Pass-through | Moderate | General + Limited Partners | Real estate & investment funds |
| LLC | Limited | Pass-through | Simple | Members (unlimited) | Small business owners seeking liability protection |
| LLP | Partial (partner-to-partner) | Pass-through | Moderate | Partners | Professional service firms |
| Nonprofit | Limited (for directors) | Tax-exempt (501c3) | Complex | No owners — board governed | Charitable & mission-driven organizations |
| PLLC | Limited (varies by state) | Pass-through | Moderate | Licensed professionals only | Doctors, lawyers, accountants & architects |
| S Corporation | Full | Pass-through (S Corp election) | Moderate | Shareholders (max 100, US only) | Established businesses wanting tax savings |
| Sole Proprietorship | None | Personal (Schedule C) | Minimal | Single owner | Freelancers, consultants & sole traders |
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