Limited Liability Partnership is a partnership where every partner has limited liability for the firm's debts and for the malpractice of other partners, common in professional services.
A Limited Liability Partnership (LLP) is a partnership in which all partners receive a statutory shield against the firm's debts and against malpractice committed by other partners. Each partner remains personally liable for their own wrongful acts.
The LLP combines partnership tax flexibility with corporate-style liability protection, and is most often used by law firms, accounting firms, architects, and consulting practices.
Formation requires filing a registration with the state (in the US) or with Companies House (in the UK), maintaining mandatory professional liability insurance in many jurisdictions, and keeping the LLP designator in the legal name. There is no minimum capital. Profits flow through to partners on a Schedule K-1 (US) or as self-assessment income (UK).
Governance is set by the partnership agreement, which typically uses an executive committee or managing partner rather than a board. UK LLPs are bodies corporate with separate legal personality and Companies House filing duties similar to companies. US LLPs vary widely by state, with some restricting the form to licensed professionals only.
You will see LLPs on the letterhead of large law and accounting firms, including the Big Four. Founders of professional services boutiques often choose LLP status to protect each partner from a colleague's malpractice claim, while preserving partnership-style profit splits. UK freelancers occasionally use LLPs to allow two or more individuals to share a business with limited liability and pass-through tax.
LLPs are not used for VC-backed startups.
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