LLP.
In plain English
A limited liability partnership, or LLP, blends a partnership with liability protection. Like a general partnership, the owners share management and the profits pass through to their personal tax returns. Unlike a general partnership, each partner is protected from the business debts and from another partner's negligence or wrongdoing, so one partner's malpractice does not put the others' personal assets at risk. LLPs are common among professional firms such as law, accounting, and architecture practices, and many states limit the structure to those licensed professions.
01Why it matters
The LLP is how professional partners work together without being personally liable for each other's mistakes, so knowing it exists matters for anyone forming a professional practice.
02The math, step by step
Three accountants form an LLP. When one is sued for a mistake on a client's return, the LLP shields the personal assets of the other two partners, unlike a general partnership where all three could be exposed.
03What this is NOT
An LLP is NOT a general partnership. Both pass income to the partners, but an LLP shields each partner from the business debts and the other partners' misconduct, which a general partnership does not.
04Receipts
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