Difference Between Llp and Lp

Advantage of LLP

An LLP is not a separate entity for income tax purposes. Profits and losses are passed through directly to the partners. Typically, an LLP partner is only personally liable for his or her own negligence or that of an employee working under the partner's direct supervision. The partner is not personally liable for the negligence of anyone else in the firm.

Disadvantage of LLP

In an LLP, individual partners can commit the partnership to formal business agreements without the consent of the other partners. Also, money and property contributed to the LLP becomes owned by the partnership unless otherwise stated, and the contributor is not entitled to its return, except as stated in the partnership agreement.

LLPs vary in legal requirements and liabilities by state, are not recognized in many states, and lack the ease of ownership transfer and investment that a corporate structure provides. In certain circumstances, LLPs are regarded as less preferable than other business forms.

Structure

In a limited partnership, the general partner is responsible for managing the company's day-to-day activities. The limited partner in a limited partnership does not participate in making managerial decisions for the business. In a limited partnership, the limited partner is more like a silent partner that has invested in the company. In a limited liability partnership, all partners of the company are allowed to make management decisions for the company.

Liability

When operating a limited partnership, the general partner has unlimited liability for company losses and debts, while a limited partner has limited liability protection against company debts and losses. In an LLP, all partners have limited liability protection against company obligations and debts. In addition, partners in an LLP have limited liability protection against malpractice suits that stem from another partner's negligent acts.

Considerations

Limited partners receive proceeds from the...