Chapter 3: Entity Types
Limited Liability Partnerships (LLP’s) are another option when it comes to business formation, and are typically used for professional services (law firms, etc.) due to the requirement for a responsible party that is personally liable. Frankly, LLC’s have grown to make partnership formations generally obsolete, since it hardly ever makes sense to take on more personal liability intentionally when creating a business. Unless designated otherwise, LLC’s with multiple members are default taxed as a partnership, so there’s no real difference on the tax side. The only other difference to keep in mind is that unlike LLC’s, LLP’s are exclusively member-managed, meaning the members of the company all have a say in the governance of the company according to their percentage ownership. LLC’s conversely, have the option to opt to be manager-managed, meaning they can delegate operational control out to a third party to provide operational control. This can come in handy if you have multiple members involved that you do not want having operational control over the business. In general, it doesn’t make a lot of sense to limit your liability protection or management options by choosing a partnership - so just make an LLC.