Limited liability partnership

Limited liability partnerships (LLP) are a form of business organization combining elements of partnerships and corporations. In the United States, each individual state has its own law governing their formation. In general, each partner in an LLP is fully liable for the debts of the partnership, but not for acts of professional negligence or malpractice committed by the other partners.

The LLP is a popular form of organization among professionals, particularly lawyers, accountants, and architects. In some U.S. states (including California and New York), LLPs can only be formed for such professional uses.

The liability of an LLP also varies from state to state. Section 306(c) of the Uniform Partnership Act, a guideline upon which many state laws are based, grants LLPs a form of limited liability similar to that of a corporation. "An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership. A partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or so acting as a partner." However, a sizable minority of states only extend such protection against negligence claims, meaning that partners in an LLP can be personally liable for contract and intentional tort claims brought against the LLP.

As in a partnership or limited liability company (LLC), the profits of an LLP are distributed among the partners for tax purposes; the LLP is not taxed separately. This avoids the problem of "double taxation" often found in corporations. An LLC differs from an LLP in that the LLP has the organizational flexibility of a partnership. Furthermore, LLCs are more likely to be subject to a state's franchise taxes.

Source for original entry: this article in Wikipedia