Are you thinking of starting a business but with a partner? There are different things that you need to know before starting a business, and two main important things are learning about LLP and LLC. Limited liability companies (LLCs) and limited liability partnerships (LLPs) are two different things that work in the same way. However, there are some differences among them that you must know about. If you are wondering which one is good for you, LLP vs LLC, then this article has everything that you need to know.

What is an LLP?
A limited liability partnership, also called LLP, protects the business partner from personal liability. With the help of LLPs, partners can share the management responsibility while minimizing their risk.
Cons of LLP
Following are some of the cons of LLP.
- The LLP is now allowed in all the states, which means the availability is limited.
- You need to have a minimum of two partners to issue the LLP.
- Partners have to pay their taxes individually.
Examples on LLP
LLP is a business structure in which both partners can share the profits and liabilities. Below, we have mentioned some of the examples that will help you understand this better.
- Law Firms: Lawyers who partner up together to make a law firm together.
- Accounting firms: Some accountants work together in accounting firms and are partners in LLP.
- Medical Officers: Doctors also work together in LLPs to create medical and healthcare systems.
What is an LLC?
Another popular business structure in the United States is an LLC. LLCs or limited liability companies are found for small to medium-sized companies, and they offer liability protection for the corporation.
Pros of LLC
- Following, we have mentioned several advantages of LLC.
- If the LLC is sued, all the personal assets of the members of the company are protected.
- The LLC is very simple, and minimal paperwork is needed.
- You can find different tax benefits here. You can even choose the tax classification according to your needs.
- You get the freedom of choosing any number of members that can take part in the LLC.
- Profit distribution is done based on the contributions of the members
Cons of LLC
Below, we have mentioned some of the cons that come with opting for an LLC for the business.
- The liability protection is not applied to fraud or corporate misconduct.
- The renewal of a business license or other renewal fees can be higher than those of an LLP.
Examples of LLC
One of the most common examples of an LLC is Alphabet, which is under the parent company of Google. Other than this, there are also many other bigger firms such as PepsiCo Inc., Exxon Mobil Corp, and a few others.
LLP vs. LLC: What Are the Differences

LLP vs. LLC: There are a lot of major differences that make these two business structures apart from each other. Belo, we have mentioned some of the main differences.
Formation
LLC is ideal for businesses that have single or multi-partners. LLP, on the other hand, needs multi-owners to run the companies.
Management
In an LLC, the business can be managed by the members or even the managers of the company. LLP businesses can only be handled by the partners.
Ownership
Suppose the business has lenders who can own an LLC; then, the company is an entity and even an individual. LLPs are less versatile, and in many states, only licensed professionals can get this LLP.
Taxation
Pass-through, but people can opt for a corporation in the LLC. In the LLP, the default is a pass-through entity.
Liability Protection
In an LLC, there is limited personal liability, and some exceptions come with it. Meanwhile, in the LLP, there is also protection from the shields.
What Are the Differences in Management Structures?
There are two major types of management systems in the limited liability company. The LLC members can manage the business themselves, and this is called member management. In this kind of system, each member has a designated rule, and they try to run the business smoothly. Other than this, the members can appoint different people to help with the management of the company, and this type of management system is called manager management. Here, the members of the industry are not directly involved in the decision-making process. Instead, the manager will manage the entire company.
LLP operates just like a normal partnership. In this, each partner has their own set of duties that they must do so that the business keeps running. These responsibilities are equally divided between the partners. A proper partnership agreement is made to ensure that the set of duties is properly separated.
What Are The Differences In Tax Benefits?
It is important to know that the Internal Revenue Service does not recognize LLPs and LLCs. The Internal Revenue Service does not recognize LLPs and LLCs, and this is why they don’t pay income taxes. However, each of these business systems is required to file an information tax return document through which the taxes will be shown to them.
The LLC is commonly referred to as a partnership until and unless it is elected to file a corporate return. In this partnership, the earnings from the business are passed through the owners, and then they report the profits and losses on their tax returns. With the help of an LLC, one benefit that you get is that you don’t have to pay double taxes.
This means that you either pay the personal income tax or the tax on the earnings. If there is a one-person LLC, then the sole member must file the self-employment taxes. However, when it comes to LLPs, there are very few states that allow pass-through on the taxes.
LLP or LLC: Which one Should You Choose?
If you are planning on starting a business with a partner, then it is important to choose the right management structure for yourself. Below, we have mentioned some of the factors that you must take into consideration before opting for LLP vs LLC.
- If you want to choose between LLPS vs LLC, then LLP is for professionals, while LLC is for small businesses.
- If you are a single owner, then you need to choose LLC, while multiple owners can choose either.
- With LLPs, you only get the offer of pass-through. But, if you want more alternatives, then go for LLC.
LLP vs. LLC: FRQs
What is the difference between LLP vs LLC?
Both of these are sole proprietorships. However, one is for locked companies, while the other is good for small businesses.
What is the best state for LLP?
Some US states do not charge income tax for the corporation; some of these places are Nevada, Ohio, South Dakota, Texas, and a few more.
LLP Vs LLC, Which One Is Better?
Both of these have the same working; however, if you are a small business with a single owner, then LLC is for you. If you are a licensed firm with one or more partners, then go for LLP.
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Final Words
You can find a lot of different management structures when starting a business. Among them are LLP and LLC. Both are commonly found systems that people use in business when they are partnering with other people. LLP vs LLC funding is very important, and this is based on what kind of business you own and your requirements.