LLLP vs LLP: Everything You Need to Know
To understand LLLP vs LLP, you first need to know that when a limited liability partnership is formed, it means some of the partners have a limited liability.3 min read
2. What Types of Business's Are LLPs?
3. Understanding an LLLP
4. What Is the Difference Between an LLLP and an LLP?
To understand LLLP vs LLP, you first need to know that when a limited liability partnership, also known as an LLP, is formed, it means some of the partners have a limited liability. In some cases, all of the partners will have a limited liability. In this type of partnership, it simply means that none of the partners are liable or responsible for the actions of the other partners. Nor are they responsible for the negligence of the other partners.
This is much like the liability held by shareholders of a corporation. A key difference, however, from corporate shareholders is that in an LLP, the partners do have the power to directly manage the business. In simple partnerships, you will see the owners hold certain legal responsibilities; this applies to partners as well who are taking on managerial roles in an LLP. If you don't want the liability, you will need to take on a silent role and not be involved in any type of managerial role.
Are LPs and LLPs Different?
In some countries, you will find that LPs and LLPs are extremely distinct from one another. When this happens, the LLP allows for all partners to have some sort of limited liability, but the LP will mandate that at least one of the partners have unlimited liability. Because variations arise from one county to the next, it's important to review local and federal laws to see which ones apply. This will help you determine which type of partnership can best suit your needs when forming a company or corporation.
What Types of Business's Are LLPs?
There are several types of business's that commonly use LLPs. Some of the most popular types include:
- Group medical practices
- Professional service providers
- Law firms
Understanding an LLLP
There is also such a thing as a limited liability limited partnership, also known as an LLLP. In this type of partnership, the general partners themselves receive the same level of liability protection as those who are in an LLP. LLLPs are not a common type of business and they are generally only seen in the real estate industry. In the United States, LLLPs are a new type of entity and they are viewed as a modified version of an LLP.
When an LLLP is formed, it will have at least one general partner and at least one or more limited partners. The general partners will take on managerial roles, while the limited partners will carry a financial stake in the company. LLLPs are not recognized in all states, thus being another reason you need to research local laws to see if you can or cannot form one.
In the states where it is legal to form an LLLP, there are generally two ways to create one. A statute will give direct authorization for the LLLP to be formed or the limited partner will file for limited liability protection according to the state statute that recognizes LLLPs.
What Is the Difference Between an LLLP and an LLP?
There is a difference between LLLPs and LLPs. An LLP, although it may sound odd, does not, in fact, have limited partners. An LLLP, however, does. An excellent way to think of the difference and to help you understand how the two are different from one another is to view an LLP as a general partnership that takes on various types of limited liability protections. An LLLP, on the other hand, does take on limited liability protection, but it's a limited partnership. Also, the primary difference lies in the fact that the two types were different entities before they elected for their general partners to have limited liability.
It used to be that companies would help general partners from being exposed by setting up limited liability companies and naming them as their general partners and then they would elect themselves to manage these companies. Not only could they benefit from the limited partnership, but they would deter themselves from being attached to any company debts. If the limited partnership was to close its doors, the general partner would be another company, not an actual person. The limited liability company would have very few assets and it would not be a big deal if it had to file for bankruptcy.
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