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LLP vs LLC: Key Similarities and Differences
What is an LLC?
A limited liability company (LLC) is a type of business structure that offers its members personal liability protection that is a staple of corporations, while also allowing the type of pass-through taxation that is common in a sole proprietorship or partnership. You can create a single member or multi member LLC in order to protect your personal assets from legal liability in the simplest manner and continue to manage the LLC on your own.
What is an LLP?
An LLP is a type of general partnership that is formed by two or more owners, who are called partners. Similar to an LLC, an LLP is a combination of a corporation and a partnership, as the partners enjoying some limited personal liability, as well. Most businesses are organized as LLPs and management duties are divided equally among the partners.
Advantages and Disadvantages of an LLC
With an LLC, all members are protected from personal liability for business debts and claims. In this manner, a creditor cannot reach a member’s personal assets if the business itself cannot pay its debts, and the member instead can only lose whatever they have invested in the company. They are equally not liable for another partner’s mistake as they would be in an LLP.
Unfortunately, LLCs require owners to file annual reports with the state and they can cost more to run than LLPs due to the many managerial and administrative legal tasks, such as filing taxes and making sure that each member’s LLC profits in their own taxes.
Advantages and Disadvantages of an LLP
Although an LLP does not have as much liability protection as an LLC, its many advantages point to the fact that an LLP is dynamic as each partner can leave and add other partners, depending on the agreement. An LLP can also allow each partner to manage the business equally, and each partner is protected from the negligence of the other.
Sadly, LLPs only allow certain professions and must have at least two partners, unlike an LLC that can be run by a sole member. While one partner can be a managing partner, other partners must also help manage the business, and they are subject to more liability than in an LLC.
LLP vs LLC: Which is Best for You?
When debating between a LLP vs. LLC, it is important to understand Florida’s state statutes to make sure that your business and company can operate in the state. While the two structures may share similarities, their differences can define the way your business is run and can be crucial in any legal or financial protection, so it is important to always check with an attorney if you need help. Call atCause today to schedule an appointment and meet with an attorney who can explain the requirements of your LLC or LLP under appropriate Florida law.