LLC vs LLP

LLC vs LLP compared: liability, taxes, management, and who can use each. Learn why professionals choose LLPs and why most businesses are better off with an LLC.

LLC and LLP sound alike, protect partners alike, and file paperwork in the same office — but they're built for different people. The short version: LLCs are for almost everyone; LLPs are for licensed professionals. Here's the full comparison.

What Each Structure Is

An LLC (Limited Liability Company) shields owners from personal liability for business debts, works for any legal business, and can have one or many members. An LLP (Limited Liability Partnership) does the same for partners but exists mainly for licensed professionals — lawyers, accountants, architects, doctors — and in many states is only available to them.

Key Differences

Factor	LLC	LLP
Available to	Any legal business	Licensed professionals (state-dependent)
Owners	Members (one or many)	Partners (usually 2+, some states allow 1)
Liability shield	Yes — broad	Yes, but historically NOT for partner malpractice
Management	Member- or manager-run	Partners share management
Default tax	Pass-through (Schedule C or 1065)	Partnership (1065 + K-1)
Personal liability for own negligence	Yes (as with any structure)	Yes

How Liability Differs

Both structures shield owners from the business's debts. The historic difference: in an LLP, a partner could still be personally liable for another partner's malpractice in some states — the reason LLPs suit professionals. Modern LLPs in many states have closed this gap, but the LLC's shield is uniformly broad and predictable across all 50 states.

Taxes Compared

Both are pass-through entities, so the tax treatment is close: single-member LLCs report on Schedule C; multi-member LLCs and LLPs file 1065/K-1 the same way. Neither pays entity-level income tax. The LLC has one extra flexibility — the S-corp election — which LLPs generally can't use.

Which One Should You Choose?

Go LLP only if (a) you're a licensed professional in a state that recognizes them, (b) your firm's partners specifically want it (it's the norm in large law and accounting firms), and (c) your insurer/buyers accept it. For everyone else — including solo professionals who don't need partnership structure — the LLC is simpler, cheaper, and more flexible.

See the full LLC vs partnership comparison and our professional LLC guide for licensed-practice details.

Frequently Asked Questions

What is the difference between an LLC and an LLP?

An LLC can be formed by anyone for any business; an LLP is reserved mainly for licensed professionals. Both offer pass-through taxes and liability protection — the audience is the main difference.

Can a solo professional form an LLP?

Some states allow single-member LLPs, but many require multiple partners. Solo professionals usually find an LLC simpler and cheaper.

Does an LLP protect against malpractice?

An LLP protects partners from business debts and, in modern states, from each other's malpractice — but each partner stays personally liable for their own negligence.

Which pays less tax: LLC or LLP?

Either can be pass-through, so effective rates are similar. The LLC adds an S-corp election option that can reduce self-employment tax at higher profits.