A Quick Primer on Limited Liability Companies and Partnerships (LLCs & LLPs)

A Limited Liability Company, or LLC, is a far newer type of business entity than a corporation, though they have quickly become the most popular type of business entity around. This rapid growth in popularity is because LLCs combine liability protection afforded by a corporation with a partnership’s lack of strict administrative rules and formalities. And let’s not forget that an LLC can also provide for tax savings as well. While it would be overkill to say you can form an LLC and immediately forget about its required formalities, it is the simplicity of the LLC that has made it hugely popular among small business owners who would much rather be running their business than scheduling shareholder and board meetings.

A Limited Liability Partnership, or LLP, is very similar to the LLC discussed above. In most situations, if you’re considering an LLC versus an LLP, choosing the LLC is the way to go simply because it affords you more options for growth and provides a better business structure overall. However, some states, like California, require certain professionals to form LLPs instead of LLCs for liability purposes. Some professionals, such as attorneys, architects, and accountants, are prevented by state law from organizing as an LLC, and therefore must form an LLP instead.

Photo Courtesy: Manish Prabhune

Eric Norton

Eric Norton

Business & Trademark Attorney at Norton Law Corporation
Eric Norton is a business and trademark attorney, and the founder of Norton Law Corporation, a modern law firm designed to help entrepreneurs with their legal needs. Eric also enjoys photography, gaming (tabletop and video), watches, and good design.
Eric Norton

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6 replies
  1. Svetlana
    Svetlana says:

    Now this is the kind of content I like to see on a legal blog…something that really helps me understand what’s going on so I can talk to my business partners about it.

    Reply
  2. gxnxbssk
    gxnxbssk says:

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  3. Katrice Stoddard
    Katrice Stoddard says:

    Now this is some excellent information!!!! I wish my old lawyer had explained these concepts to me this well.

    Reply
  4. hatloly
    hatloly says:

    Great topic. I needs to spend a while learning more on this before me and my partner start our business. Thank you for this excellent info.

    Reply

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  1. […] by their tax treatment, but that’s a story for another article, and I have posted an introduction to LLCs and a primer on Corporations before, so check them out if you want to learn more about those […]

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