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LLP vs. LLC: Key Differences and How To Choose
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This post was originally published on September 17, 2021, and has been updated for accuracy, comprehensiveness, and freshness on March 24, 2026.
- LLCs are flexible. They work for solo or multi-owner businesses, and let you choose how you're taxed.
- LLPs require two or more partners. Many states limit LLPs to licensed professionals, like lawyers, accountants, and architects.
- The right choice depends on your business type and the number of owners.
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.
What is an LLP?
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.
What is an LLC?
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.
Key differences between LLP and LLC
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.
Management structure
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.
Liability protection
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.
Tax benefits
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.
Eligibility and restrictions
- LLPs are limited in many states: States like California, New York, and Nevada only allow licensed professionals to form LLPs.
- LLCs are available to nearly anyone: Most states allow any type of business to form an LLC.
- LLPs always require two or more partners: If you're starting a business by yourself, an LLP isn't an option.
How to choose between an LLC and an LLP
Choose an LLC if:
- You're starting a business on your own
- You want flexibility in how you're taxed
- Your business isn't in a licensed profession
Choose an LLP if:
- You're in a licensed profession and want to partner with colleagues
- You want protection from your partners' mistakes
- Your state allows LLPs for your industry
Once you choose between LLC or LLP, get peace of mind with LegalShield
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.
Frequently Asked Questions
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.
Get the Answers You Need, When You Need Them
Written and maintained by the LegalShield content team, covering legal and identity protection topics for individuals, families, and small businesses.
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