Naperville Business Lawyer Discusses the Difference Between a Limited Liability Company and a Limited Liability Partnership
If you are planning on starting a business, you will need to decide what type of business entity is right for you. The type of business structure you choose will influence nearly every aspect of your business, so it is important to do your research and select the type of business structure that best meets your needs. The most common types of businesses include partnerships, sole proprietorships, corporation and S corporations, limited liability companies and limited liability partnerships. Each of these business structures come with different legal implications and tax consequences. Today, I will focus on the difference between a limited liability company (LLC) and a limited liability partnership (LLP).
Limited Liability Company
An LLC is a hybrid business entity which includes characteristics of both corporations and partnerships. A limited liability company separates the personal assets of the owner from business assets. Business owners who own an LLC are called “members” and are not personally liable for the business’s debts. Taxes, however, are not paid through the business entity in an LLC. Profits and losses are instead included on owner’s personal tax return. An LLC is typically easier to establish than a corporation and provides more flexibility than other business structures.
Illinois law does not allow insurance or banking institutions to form LLCs. Instead, they must structure the business as either a limited liability partnership or a corporation.
Limited Liability Partnership
An LLP is a general partnership created by two or more owners, who are called “partners.” Like an LLC, an LLP also has characteristics of both corporations and partnerships. An LLP must include at least one general partner and may also include limited partners. A general partner, or managing partner, has limited liability. This means that a general partner is legally responsible for his or her own misconduct but not for other partners’ wrongful acts, negligence, or malpractice. Limited partners are silent partners who do not have managing rights but also do not have personal liability for business actions. LLPs are common in professional service businesses such as those involving lawyers, doctors, dentists, accountants, and architects.
Contact an Illinois Business Law Attorney
If you are considering starting a business and are not sure about which business entity to choose, contact the Gierach Law Firm to get the legal guidance you need. Call us at 630-756-1160 today to schedule a confidential consultation with a knowledgeable Naperville business lawyer.
Illinois Department of Commerce and Economic Opportunity