LLCs, LLPs, And LLLPs…What’s The Difference?
If you are looking to start a business, there are a lot of options. Many people know about an LLC, which can provide some benefits that a traditional corporation cannot do. You can be a single-member LLC, there are tax benefits, and you have flexibility over who has what decision making for the business. Each manager can specialize in the areas that they do well, and share in the profits of the business.
But you may not know that there are actually various kinds of LLCs, with subtle and slight differences between each other.
The “P” in LLP stands for Partnership—Limited Liability Partnership. An LLP operates in much the same way as an LLC does, and it has the same liability—specifically, the companies are separate, with separate assets, but the managers (owners) are personally liable for any damages that they may cause, from their own individual actions, so there is slightly less protection that you would get personally, from a traditional company.
An LLP is different because it must have more than one owner or partner—in a traditional LLC you could have just one person that is an owner or partner in the business.
All partners in the LLP must share decision-making and have the power to enter the business into agreements or contracts. They also must share equally in any of the business’ gains or losses.
This is different from an LLC, which can be managed by all remembers, or managed by only some of the managers. There is more flexibility than an LLC, as far as who does what, who has control over decisions for the company, and who gets what when it comes to distribution of profits. This makes LLCs much more flexible.
The LLC is also better when you have partners in “name only,” that is, people who may contribute in a limited (but important) manner, whether its funding, or some professional service—but that person doesn’t actually want to take a complete and active role in the day to day operations of the business.
There is also an LLLP, which is a limited liability limited partnership. This business entity has a general and a limited partner, with the latter (limited) being more “hands off.” You may have heard of limited partners being called “silent partners,” who often just contribute money, but aren’t actively involved in the business.
Also, unlike an LLC, in an LLLP, some managing partners (usually the more active, decision making members, as opposed to the limited, silent members) must have individual liability for things the business does. However, in an LLC, no members are liable for things the company may do, or for what the company may get sued for.
One other difference: A company can own an LLC; even registered partnerships can legally own an LLC. However, corporations are not legally allowed to own an LLLP.
Call the West Palm Beach commercial litigation attorneys at Pike & Lustig today for help making the important decisions for your business.