LLP vs. LLC

An LLC, or a limited liability corporation, is slightly different than an LLP, or a limited liability partnership. First, an LLC can be formed by just on single individual as a sole proprietor, whereas a LLP must include more than one person.

In both cases, individual owners of a LLP and a LLC have limited financial and legal liability on issues that pertain to the company. However, in some jurisdictions, each member of the LLP may have differing levels of liability, both financially and legally, depending on their percentage of ownership in the company. However, neither partner is liable for the actions of any other member of the LLP, regardless of how and when they took those actions. For example, if one partner were to commit an act of fraud in the name of the company, the other partner would not be liable for the action in most jurisdictions, unless they were aware of the act.

Some jurisdictions require that at least one partner have unlimited liability or be responsible for the actions of each employee and the company as an entity. That person could then be held legally and financially responsible for any action by an employee or the company in daily business transactions. In fact, that person could be forced to pay all creditors if the company were to go bankrupt.

LLPs are not corporations and are subject to different taxation than an LLC. In addition, the amount of liability varies between the two, as do the operations and structures.