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 Posted on September 30, 2022 in Business Law

Yorkville business law attorneyWhat are the differences between a Limited Liability Partnership and a Limited Liability Company?

This article will discuss the differences between a Limited Liability Partnership and a Limited Liability Company. 

Limited Liability Partnership aka LLP

A Limited Liability Partnership or otherwise known as an “LLP” is a business and corporate structure that provides asset protection and growth opportunities. A major reason to establish an LLP is to growth a business and provide a corporate governance structure for the high-growth real estate venture or company. Entrepreneurs and real estate ventures are high-growth, high-risk ventures, which require the expertise of lawyers and accountants. 

General Partner vs. Limited Partner

An LLP is comprised of a general partner and limited partners. A general partner is the key entrepreneur or enterprise, which spearheads a commercial enterprise of limited partners. A limited partner is a business owner that acts an investor or key employee of a business. The benefit of the limited partner is they own a share of the commercial enterprise without the control and voting share of the general partner. A major benefit of a limited partner is limited liability protection. Essentially, a limited partner has much greater liability and asset protection than a general partner.

A key feature of the limited partner is their legal risks is limited to their initial investment. Furthermore, a limited partner is like a silent investor or partner because they support the vision of the entrepreneur without the responsibilities of the general partner. Limited partners are unlike general partners because they do not participate in the day-to-day decision making of the business enterprise. Thus, the limited partner can generate income and profits without the substantial risk of business ownership.

In conclusion, a general partner is the entrepreneur or the founder of the real estate venture or commercial enterprise. The general partner exercises the control and day-to-day management responsibilities of managing the commercial enterprise. The general partner may consist of multiple founders or partners that have formed a legal entity called the general partner. A key drawback of the general partner is the lack of limited liability protection. However, the general partner also incorporates as a Limited Liability Company to minimize or eliminate the general liability concerns of being a general partner. Often, real estate investment groups or partnerships are structured as general partnerships or otherwise named Limited Liability Partnerships (LLPs). Law firms and professional service organizations also desire to be set-up as LLPs such as accountants, lawyers, architects, and dentists. A major benefit of the LLP is the ability to utilize the skill, acumen, and expertise of key employees and investors. Due to the business structure, the limited partners could achieve substantial profitability while minimizing their legal risks.

What is a Limited Liability Company?

A Limited Liability Company or otherwise known as an “LLC” is a mixture of a partnership and a corporate. A major benefit of a partnership is the managerial flexibility, and the tax law benefits. A key feature of a partnership is the flexibility to match the specific business requirements and unique constraints and opportunities available to entrepreneurs and their employees.

Personal Limited Protection

An attribute of a corporation is limited liability protection. An LLC maintains limited liability protection to protect a business owner’s personal assets from business liability concerns. Entrepreneurship and real estate investors face substantial threats such as bankruptcy, foreclosure, litigation, liens, and judgments. Personal liability protection is a major benefit of an LLC. An LLP and LLC both have personal limited liability protection. 

The limited partners have substantial greater liability protection under an LLP versus an LLC. However, the LLC allows limited business owners the ability to participate in voting and business decision-making decisions and day to day-management responsibilities unlike LLPs. 

Tax Concerns of LLPs and LLCs

LLPs and LLCs have similar tax treatment because both are pass-through entities because the business entity is disregarded and ignored. Simply put, the LLPs and LLCs are filed on the partners personal tax returns via their specific schedules highlighting the profits and losses of the business ventures. Each partner or business owner reports their tax attributes and income as self-employed people. Therefore, each partner or business owner reports their share of the profits and losses on their own federal income tax returns.

Montgomery Business Growth Advisors and Tax Planning Attorneys

Gateville Law Firm is a real estate and commercial law firm concentrating in commercial real estate, general counsel services, and business growth and liability structure planning. Unlike most lawyers, Gateville Law Firm has a niche in business structure and asset protection. High-growth business enterprises often set-up multiple locations and have multiple-lines of business, which require expert legal and business structure. 

The attorneys and support staff at Gateville Law Firm concentrate in the following areas of law:

  • Set-up and structure of LLCs, Limited Partnerships, Limited Partnerships, and other business enterprises

  • Set-up of holding and subsidiary companies and partnerships to maximize growth, while limiting liability concerns

  • Establishment of real estate ventures and investment opportunities require highly skilled business growth expertise and business liability planning.

  • Commercial real estate sales and purchases including drafting of commercial real estate leases.

  • Real estate closings requiring simple to sophisticated real estate legal expertise while minimizing liability concerns.

In conclusion, the Attorneys and Support Staff of Gateville Law Firm are the premier real estate law firm for landlords and commercial real estate ventures. Unlike most law firms, the support staff at Gateville Law Firm worked at reputable title companies and received exceptional real estate training and expertise handling thousands of transactions. This expertise is critical for residential and commercial real estate enterprises and business ventures. Call us today at 630-780-1034 or via online contact form.








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