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Guilherme Mazui

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What is the Difference Between LLP and Partnership?

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The main difference between a Limited Liability Partnership (LLP) and a Partnership lies in the liability protection offered to the partners.

In a Partnership, also known as a General Partnership (GP), all partners are personally liable for the debts and obligations of the business. This means that each partner can be held responsible for the entire debt, not just their share. On the other hand, a Limited Liability Partnership (LLP) provides limited liability protection to its partners, meaning that their personal assets are shielded from the partnership's debts and obligations.

Here are some key differences between LLP and Partnership:

  • Liability: In a Partnership, all partners have unlimited personal liability for the business's debts and obligations. In an LLP, partners have limited personal liability, and their personal assets are protected from the partnership's debts and obligations.
  • Management: In a Partnership, all partners contribute to the day-to-day management of the business and have the authority to make business decisions. In an LLP, partners can have oversight of day-to-day firm affairs while maintaining their limited liability.
  • Formation: Both Partnerships and LLPs are created through a partnership agreement, but they are formed at the state level by filing a "certificate of limited partnership" or "certificate of limited liability partnership".
  • Taxation: Partnerships and LLPs are pass-through entities, meaning that the profits and losses are reported on the partners' individual tax returns.
  • Conversion: LLPs typically offer easier conversion from a General Partnership than to a Limited Liability Company (LLC) or Corporation.

In summary, the main difference between a Partnership and an LLP is the limited liability protection offered to partners in an LLP. This protection shields partners' personal assets from the partnership's debts and obligations, while partners in a Partnership have unlimited personal liability for the business's debts and obligations.

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  • What is the Difference Between LLP and Partnership?
  • Comparative Table: LLP vs Partnership

    • Comparative Table: LLP vs Partnership

    Here is a table comparing the differences between a Limited Partnership (LP) and a General Partnership (GP):

    Feature Limited Partnership (LP) General Partnership (GP)
    Management General partners manage the business, while limited partners do not participate in day-to-day operations. All partners contribute to the day-to-day management of the business.
    Liability General partners have unlimited liability, while limited partners have limited liability. Partners share equal personal responsibility for the business, with equal shares of profits and liabilities.
    Investment Limited partners serve as investors, with their investment in the LP being the extent of their liability. Partners contribute resources such as property, money, skill, or labor in exchange for sharing in the profits and losses of the business.
    Flexibility LPs are often used for short-term projects or ventures, such as films or family estate planning. GPs are more suited for long-term business operations.
    Partnership Agreement Recommended to outline management roles, partner responsibilities, and events that cause the partnership to end operations. Typically describes partners' authorities and responsibilities.

    In summary, a Limited Partnership has general partners who manage the business and limited partners who serve solely as investors, while a General Partnership involves all partners contributing to management and sharing equal personal responsibility for the business.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.