An LLP is a general partnership wherein each partner is not responsible for the actions of other partners in relation to the partnership. There is, however, no limited liability for each partner in relation to his own actions while conducting partnership business. Because professional companies (PLLCs, professional corporations, etc.) do not provide professionals with limited liability against malpractice anyway, an LLP is often used by professionals who wish to form a partnership but not be exposed to liability from each other’s malpractice errors. Indeed, some states only allow professionals to form LLPs.
Although an LLP provides more limited liability than a general partnership (where all partners could be held liable for any one partner’s mistake), its limited liability is inferior to that of an LLC, corporation or even a limited partnership. Nonetheless, it does still benefit from charging order protection, an informal decision-making/management process, and partnership pass-through tax treatment. However it is not recommended for the non-professional, even in states where a non-professional may form an LLP.
Related Links:
- Are there special business organizations doctors and other professionals must use?
- What is a limited partnership (LP)?
- What is a limited liability limited partnership (LLLP)?
- What is charging order protection?
- What is pass-through taxation?