What is a Limited Liability Partnership?
A business organization that allows limited partners to enjoy limited personal liability while general partners have unlimited personal liability. A limited liability partnership (LLP) is basically a general partnership, but with the addition of giving the partners at least some limited personal liability. There is only one class of partner.The degree of liability limitation for an LLP varies from state to state. Some states provide a limitation of personal liability that is similar to a corporation.
Some states only limit personal liability for the negligence of a partner. Also, some states take a middle ground, and limit personal liability for a partner’s negligence. This also refers to partnership contracts and other debts.
Due to the fact that LLP is a partnership, it must have two or more owners.
How Limited is Limited Liability?
The actual details of a limited liability partnership depend on where you create it. In general, however, your personal assets as a partner will be protected from legal action. Basically, the liability is limited in the sense that you will lose assets in the partnership, but not those outside of it. The partnership is the first target for any suit, although a specific partner could be liable if he or she personally did something wrong.
Advantages of a Limited Liability Partnership
Liability protection for all partners. The main advantage of an LLP is that all partners are protected by some form of liability protection. This also means each partner gets a say in how the business is ran.
Securities laws. Since all members of an LLP are basically general partners, security laws do not generally come into play when the members change ownership.
Mandatory by law. In some states, certain professions are can not form other types of business structures. It is also a requirement by law to become a limited liability partnership.