This post was originally published on September 17, 2021, and has been updated for accuracy, comprehensiveness, and freshness on March 24, 2026.
Figuring out a business structure can feel overwhelming when all you really want is to get your business off the ground. One of the most common questions is the difference between an LLC and an LLP. When choosing between a limited liability company and a limited liability partnership, both offer protection, but they work in different ways. In this guide, we'll break down LLC vs. LLP and how to decide which is right for you.
A limited liability partnership (LLP) is a business entity formed by two or more owners in partnership with each other. LLPs are a common choice for people who want to pool their talents and resources while still shielding their personal assets and limiting their personal liability.
Unlike a general partnership, where there's no legal entity and each partner takes on unlimited liability, an LLP is an actual separate business entity that limits the personal liability of the partners involved in most states.
It's also worth noting that many states (including California, New York, and Nevada) only allow licensed professionals to form LLPs. Doctors, lawyers, accountants, and architects can typically create one, but a retail shop or tech startup might not be able to.
A limited liability company (LLC) is a business structure that protects your personal assets from business debts. LLCs work for almost any type of business, from freelancers and online stores to restaurants and construction companies.
You can set one up with just yourself or bring in multiple members, making it the go-to for solo entrepreneurs.
They're easier and cheaper to form than corporations but offer many of the same protections, which is why they're one of the most popular choices for small business owners.
The biggest differences between an LLC and an LLP (besides the need for at least one business partner to form an LLP) are how they're managed, the protection they offer owners, and how they're taxed.
In an LLC, the operating agreement determines how you manage the business. You can go with a member-managed setup where everyone has a say, or a manager-managed setup where one or a few people run things while the others stay hands-off.
In an LLP, a partnership agreement spells out each partner's role, how much money they put in, and how profits get split.
With an LLC, your personal assets are generally safe from business debts and lawsuits. With an LLP, you're protected from your partners' mistakes but not your own.
Both LLCs and LLPs are pass-through entities. LLPs can file taxes only as partnerships. LLCs get to choose — you can be taxed as a sole proprietorship, partnership, or corporation.
Choose an LLC if:
Choose an LLP if:
With a LegalShield business plan, you get consultations with a provider lawyer who can help with things like reviewing your operating agreement or partnership agreement before you sign.
Whether you need a contract reviewed before you sign, help collecting on a late invoice, or a lawyer to step in when a business dispute comes up, LegalShield's business legal plans put an experienced lawyer in your corner for an affordable monthly fee.
For most small businesses and solo entrepreneurs, an LLC can be the better fit because of its flexibility and availability. LLPs work well for licensed professionals who want to partner together while staying protected from each other's liability.
In some states, you can convert an LLP to an LLC by filing a conversion document. Other states require completely dissolving the LLP and forming a new LLC. Talking to a lawyer before starting the process is a wise idea to make sure you don't miss any steps or create unexpected tax issues.
LLCs tend to be slightly easier because they're available in all states and don't have professional licensing requirements. LLPs may require extra steps, such as verifying that your profession qualifies, meeting state-specific partnership rules, and drafting a partnership agreement.
Written and maintained by the LegalShield content team, covering legal and identity protection topics for individuals, families, and small businesses.
An indemnity agreement settles the “who is responsible” question ahead of time. One party promises, in writing, to cover certain losses tied to the work, so the other isn't left with the bill. These promises appear in construction contracts, leases, and business sales.
A certificate of good standing is official proof from your state that your business is registered and current on its requirements. Most lenders and agencies want a recent one, so it helps to know how to get it before someone asks.
Whether the goal is selling a company, bringing in a business partner, or passing it to a family member, the LLC ownership transfer often involves reviewing the LLC's operating agreement and the applicable state's rules.
If you want to do business under a name that isn't your own legal name or your LLC's registered name, you need a trade name, also known as a doing business as (DBA) name.
A consulting agreement is a contract between a service provider, such as an independent contractor, and a recipient.
Hold harmless agreements can help reduce a business's liability by having signatories accept a certain amount of risk.
Getting an LLC in New York generally involves choosing a business name, filing Articles of Organization with the New York Department of State, creating a written Operating Agreement, completing New York’s publication requirement, and handling tax and business setup steps, like getting an EIN.
Knowing how to franchise your business takes more than enthusiasm. It takes documented systems, legal preparation, and the right partners.
