LLC LLP Request For Information: Everything You Need to Know
An LLC LLP Request for Information (TR-570) is issued by the New York Department of Finance.3 min read
2. Advantages of LLCs and LLPs
2.1. Disadvantages of LLCs and LLPs3. Frequently Asked Questions About LLC/LLP Request for Information
4. Is an LLP a viable alternative to an LLC?
5. What are the differences between LLCs and LLPs?
6. How are LLPs taxed?
7. What is the advantage of forming an LLC over an LLP?
8. How are LLCs structured?
9. Steps to Form an LLC or LLP
Updated October 29, 2020:
What is an LLC LLP Request for Information?
An LLC LLP Request for Information (TR-570) is issued by the New York Department of Finance. If you have received one of these notices, you have already gone through part of the process of organizing your business as either an LLC or an LLP.
An LLC is an unincorporated company with members that each have limited liability protection. An LLP is a partnership for professional services. Although both structures help to limit personal liability for the owners, LLPs operate as general partnerships with extra liability protection. Partners can make decisions for the company and share in the profits.
Advantages of LLCs and LLPs
2. LLPs are better designed for partnerships where the partners operate separately.
Disadvantages of LLCs and LLPs
Depending on which state you live in, you may or may not be able to form an LLP since some states limit them to certain professions.
Frequently Asked Questions About LLC/LLP Request for Information
What are the limits placed on the protections from an LLC and LLP?
In both cases, the protection that you receive from an LLC and LLP is limited. If your LLC/LLP is facing a lawsuit, your liability will be determined by looking at the following:
- Who is being sued (i.e., the LLC/LLP, you, or one of your partners).
- Why the lawsuit was filed.
- If there was a criminal action involved that you were a part of.
If your partner(s) or the LLC/LLP itself is being sued, you can be protected if you are not responsible for the situation that led to the lawsuit. If the lawsuit was filed for any reason other than a criminal action, you should also have your protections intact. However, you may lose your protection if you were complicit in any criminal activity involving the company.
Is an LLP a viable alternative to an LLC?
The option to form an LLP can be a viable alternative to forming an LLC, but there are restrictions on forming an LLP. LLPs are not allowed in some states unless you are a part of one of the specified professions. These generally include:
What are the differences between LLCs and LLPs?
There are several key differences between an LLC and an LLP. These include:
- LLPs must have at least two partners. LLCs, however, can be formed by a single person.
- LLPs generally can only be owned by single entities/individuals. LLCs can be owned by other business entities like corporations or trusts.
- LLPs and LLCs are taxed differently depending on your state's laws.
How are LLPs taxed?
LLPs are taxed in the same manner as general partnerships, as pass-through entities. A single tax form for the partnership is filed showing the overall performance of the partnership. Then, each partner claims his or her segment of the earnings from the partnership on personal tax forms.
What is the advantage of forming an LLC over an LLP?
LLCs have more flexibility in the way that they are taxed. While LLPs are taxed as partnerships to avoid double-taxation, LLCs can choose how they will be taxed between:
- Sole Proprietorship, if the LLC has one member.
- General Partnership, if the LLC has more than one member.
- Corporation, if the LLC decides to do that.
How are LLCs structured?
While LLCs share a default structure of dividing everything evenly among the partners, that is not always the case. If you create an LLC Operating Agreement when you form your LLC, You can decide on a new structure as well as lay out a process for decisions to be made.
Steps to Form an LLC or LLP
1. File the appropriate organizational documents with the state agency that handles business filings.
- You can find fees and forms on the agency's website.
- In New York, this is the NYS Department of State.
2. Create a partnership or operating agreement, depending on if you plan to have an LLP or an LLC.
3. Apply for an EIN on the IRS website.
4. On New York's LLC and LLP forms, you can check a box to note if the business should be taxed as a separate entity for state taxes.
5. Once the LLC or LLP successfully registers, the NYS Department of State Tax Department will send out a request for information that needs to be filled out.
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