A limited liability partnership (LLP) is a business structure that combines elements of a partnership and a corporation. It offers limited liability protection to its partners while allowing them to manage the business.
Here are the key characteristics of a limited liability partnership:
Limited Liability: Similar to a corporation, an LLP provides its partners with limited liability protection. This means that the assets of the partners are generally protected from the debts and liabilities of the business. However, this protection typically does not extend to personal malpractice claims against individual partners.
Partnership Structure: Like a traditional partnership, an LLP is owned and operated by two or more partners. These partners share in the profits, losses, and management responsibilities.
Flexibility in Management: LLPs offer flexibility in management structure. While all partners have the right to participate in the management of the business, they can choose to designate specific partners as managing partners with greater authority and responsibility.
Pass-through Taxation: Similar to limited liability companies (LLCs), LLPs are usually treated as pass-through entities for tax purposes. This means that the profits and losses of the LLP are passed through to the individual tax returns of the partners, who then report their share of the income or losses on their tax returns.
Limited Life Span: In many jurisdictions, LLPs have a limited life span and may be dissolved upon the withdrawal, death, or bankruptcy of a partner. However, some jurisdictions allow LLPs to have perpetual existence.