State-by-state, limited liability partnerships provide varying levels of protection for professionals in certain states. When comparing types of partnerships, limited liability partnerships (LLPs) may be worth considering. LLPs differ significantly from limited liability companies in some important ways. The minimum number of partners in an LLP is two, since they are technically partnerships. Read more to register LLP online.
In many states, LLP owners have limited liability limits against claims from the company’s creditors because of their business structure. Unlike an LLC or a corporation, the limited shield does not provide as much protection. In many states, LLPs are also less protected from personal creditors than LLCs, so their owners’ business interests are less protected.
LLPs are restricted to professionals in California and New York, so other business owners cannot use them. Previously, many professions could not incorporate, preventing them from protecting themselves with a corporate shield. With the LLP, older professional partnerships can convert to limited liability status without incurring tax consequences, nor incurring the costs associated with transferring assets from the old partnership to the new partnership.
LLPs cannot be converted into general partnerships through any other legal process. The only difference between an LLP and a general partnership is its registration. A new entity is not created nor is there a dissolution. However, the old entity now falls under a new set of laws (i.e., those governing LLPs). The conversion does not result in a change to the entity, so there is no taxable event. Apart from that, the registration process does not require any retitling of assets, making the conversion particularly straightforward and inexpensive.
The LLC vs. the LLP
LLPs and LLCs differ. Due to important differences, small business owners generally favor LLCs. Both LLCs and LLPs have limited liability, but the quality of the limited liability is lower for LLPs. You don’t have to create your business entity in the state where you live or conduct business in order to form an LLP. The “full shield” protects LLPs in other states, just as it does for LLCs and corporations. Legislators are increasingly providing full shield protection to their constituents.
Individuals’ responsibilities. LLC owners’ business interests are less protected from their personal creditors’ claims in many states than LLP owners’. There are states that protect LLC owners’ business interests from personal creditors. This protection is not provided for LLP owners, since no state offers it.
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